♪ >> announcer: this is "nightly business repor with tyler mathisen and sue h if you looked at our third-quarter earnings, this one's horrible. >> the profit miss was bad, the initial stock drop was ugly, but the late-day turnaround was electric. road to tax cuts. the senate approves a budget, kick-starting the process for tax cuts and reform. and kobe inc. he scored on the court, but can kobe bryant win in the business world? those stories and more tonight on "nightly business report" f good evening, everyone, and welcome. i'm tyler mathisen. sue herera is off tonight. well, stocks finished the day at new records after the senate took a step, a big step, toward tax reform.

more on that in a moment. but we begin tonight with a company that is an american icon, albeit today a tarnished one, general electric. today the company missed earnings forecasts by a lot, a stark reminder of the work that lays ahead for the new ceo. he summed up the quarter by sayi, "our results are unacceptable, to say the least." early today, wall street agreed. but after falling sharply, the stock made an about face, an abrupt one, embarking on its biggest comeback since 2009 and finishing up 1%. morgan brennan takes a look at the quarter and what may be ahead for ge. >> reporter: for general electric, it's all about restructuring. still, the oldest stock in the dow's new ceo john flannery says everything is up for review as he begins to make "sweeping changes" at the struggling company. >> i've spent really 90 days exhaustive review of the whole

company, so the businesses, our culture, corporate spending, everything at the company has been up for examination, every stone turned, no sacred cows. >> reporter: the comments came on the heels of a particularly disappointing quarter. earnings missed expectations by 20 cents, and full-year profits were dramatically slashed. but the biggest surprise was operating cash flow. ge had previously forecast $12 to $14 billion for 2017. today it cut that metric in half. flannery is already taking steps to rein in costs, eliminating what could be thousands of corporate jobs. grounding the fleet of company-owned jets and shuttering some research centers. today he doubled ge's cost-cutting forecast to $2 billion for 2018. but with all this talk of cost-cutting, investors are concerned about the future of the dividend. flannery did not make any promises it was safe. >> when i look at all of the capital allocation things quite rationally.

if it makes sense to pay divide, do it. if it makes sense to buy a stock back, do it. if it makes sense to buy a company, sell a company. so i don't review it emotionally. it's best use of the company's resources, financial capital, and how is that accrued at the benefit of the owners. >> reporter: flannery says a final decision will come soon as he gets ready to update next month. but analysts and shareholders believe a e cards, especially after today's report. >> clearly, a dividend cut would free up a lot of flexibility for john flannery to execute his restructuring. $8 billion a year in dividends is a big burden. he has the most political capital he will probably ever have between now and november 13th at the update meeting, so he has to think very hard about this. he has one opportunity to cut the dividend, and this is it. >> reporter: some are more upbeat about the prospects than others, especially since

flannery said he would shed another $20 billion of assets over the next seven years. >> if he can do anything at all to create value, it's a $30 stock. i mean, it's as simple to that. honeywell was the same way, beelined straight $20 to $30 once the train was back on the tracks. >> reporte what ge will spin off remains a mystery, at least until next month, but analysts are already pointing to health care, transportation, and ge's oldest business, lighting, as possible candidates. for "nightly business repor >> and as morgan pointed out, it began literally wi the light bulb. general electric formed in 1892, when thomas edison's general electric company merged with thomas houston electric. in 1896, ge joined the newly formed dow jones industrial average. and now it is the last of the original 12 dow stocks still included in the index. two decades ago, it was a high-flying stock with a profit performance to match. those days are long gone.

no matter the product, from light bulbs to household appliances to power generation and locomotives, even jet engines, if you bought ge, for decades you were buying a or the world leader, and for years, the same could be said of its shares. retail and institutional investors came to see ge as a bellwether of the global economy. by 1952, it was the country's fourth most widely held stock, and for good reason -- earnings just about doubled in the '50s, but ge's stock price rose by a factor of five. no wonder its tv ads were a part of everyday life. >> at general electric, progress is our most important project. >> ah, but growth stocks, they have to keep growing. in the 1960s, ge became one of the eight major computer companies, joining the likes of ibm, honeywell and rca, but the 1970s brought economic turbulence, and ge's stock stagnated along with the

economy. in 1981, jack welch began a 20-year reign as ceo. the company made 600 acquisition acquisitio, including nbc parent rca in 1986. welch became famous for stream-lining operations, and ge would sell many rca properties, but it hung on to nbc, even as welch shifted the bulk of ge's business away from old-line manufacturing an. critics were puzzled about ge's change of direction. it became one of the country's biggest banks. under welch, ge went from a $14 billion market value company to one worth almost $500 billion. its stock reliably moved with the market or outpaced it. but when jeff immelt replaced welch in 2001, ge's hot stock run ended. since then, it's down roughly 35%, and it's not even 1 of the 20t widely held shares anymore. >> ge, light bulbs were the day.

i don't know about now. >> so they're known more as a light bulb company, and people are not using incandescent light bulbs anymore. >> i'm not worried about it, because i don't own it! [ laughter ] >> iment largely unwound the house that welch built. ge's financial businesses paired wa. nbcuniversal sold to comcast. oil services behemoth baker hughes bought just as oil tanked. the stock is this year's worst dow performer, its dividend now in doubt. >> it's bad, and i believe it's getting worse. my m it's going lower. >> others say this might be the time to buy ge. its price is low. its new ceo, john flannery, determined to bring good things back to life at one of america's most storied com >> and here to discuss what is next for the company is max wolff, chief economist at disruptive technology advisers. welcome, max. always good to see you. so, which is it? is this company a buy or is it

just going to get worse and you wouldn't touch it right now? >> good to be here. always great to join you, tyler. >> good to see you. >> i think this is an oil tanker, and watching that turn is not beautiful, it's not a ballet, and it's not fast, but i think there is some evidence that this oil tanker is being turned, if slowly. i don't think we're out of the woods here, but i think we're starting to see the kind of moves that we saw work, if slowly and sometimes frustratingly, at some of the other names, some that you mentioned, the honeywells and ibms, and it's a big job, because this is a tech 1.0 company that sort of became a financial conglomerate that has to be a sleek tech conglomerate that's tech 2.0. i think it can get there, but i don't think we know for sure it will get there and we're not done turning the tanker. >> will it ultimately five years from now be a smaller company and maybe a more profi >> yes. we know that's the plan. we have no reason to doubt it. when you're talking about shedding billions of dollars in costs and maybe tens of billions of dollars worth of units, i think we know you're going to be a smaller company. i think the only way this turns

around really, really fast and sort of whip-saws the bears in the name, whic oil and gas investments that, unfortunately, the company made at a rather unfortunate time in the market. we don't think that comes back fast enough, but we do think that comes back a little, and we do think it becomes an industrial technology company, a paired-down conglomerate for the next set of challenges for the next 50 years. >> sounds like you're saying, this company is a big oil tanker that's about to turn or is initiating a turn. so i sense that you would not be jumping into the shares with both feet at this point. >> no, i think jumping off an oil tanker is probably something for someone more adventurous and more coordinated than myself, but i don't know that this is such a terrible story, either. i think the story kind of gets stuck in this war of extremes of terrible, death trap for money, or immediate turnaround, huge up side. i do think that it's going to be a little while to get there, but i don't see there's a reason to

not think we get there. also, i would point out that we have a new ceo. he's also kind of going to talk about everything that's going wrong to give himself a chance to reb off reasonable expectation, but i think he knows the company, because last time i checked, i think he's been there for a couple decades, so he is not stopping from zero. >> let's talk a little bit about the dividend. what ought to happen there or what do you expect to happen there? >> i think there is some risk, although not immediate or for sure. i think there is some risk we see the dividend maybe taken down a bit. we did see that when the financial units got in trouble at the 2008 period, and we didn't see it rise right back up. the truth is, if you're a long-term investor in the name and they're really having trouble sustaining an $8 billion total cash dividend payout and you are long-term-minded, want to see this thing turn, you probably do want to give up a little bit on the dividend so there's enough cash flow for them to make the investments and do the kind of things they need to do, and that really is going to hinge on whether that has to happen is going to hinge on how quick and how much of a cost-cutting, if they can get a little relief on the somewhat troubled power generation

business, and the significantly troubled oil and gas businesses. >> all right, max, thank you so much. great to see you. have a great weekend. >> thank you. auflz a pleasure. >> max wolff with disruptive technologies. as we mentioned, stocks finished the day and the week at records, much of that due to senate approval of a $4 trillion budget measure paving the way for a possible move on tax reform. now, that prospect lifted bank stocks and sent the bank etf to a ten-year high, and that boosted the broader market along with it. the dow jones industrial average advanced 165 points to finish at 23,328, on its way, maybe, to 24,000? nasdaq up nearly 24 and the s&p 500 added 13. for the week, all of the major indexes saw gains as the dow blew past 23,000. and late last night, the senate did approve a budget blueprint that would pro a $1.5 trillion tax cut -- protect it, i should say, from afilibus.

the senate resolution was narrowly approved by a vote of 51-49. the house will take it up next week, allowing for a tax overhaul possibly to move ahead and maybe even swiftly. john harwood has been covering this story for us from washington tonight. john, that is the slimmest of margins. what does it suggest about this tax cut or tax reform debate that we seem to be about to embark upon? >> well, first of all, the senate passage of that budget resolution that you mentioned and the revelation of a deal with the house that means the house is simply going to pass the senate budget resolution, they're not going to debate it. that is a positive sign for tax reform. that means that they have removed one of the hurdles facing them because they had to get that done. and if they took away that disagreement however, the hurdles that remain are larger than that one. and that is, what is it going to do to the deficit, and also what is the nature of those tax cuts?

where do they go? to the middle class, to the wealthy? those are things that simply haven't been worked out. >> this was essentially a party-line vote, nothing too surprising in that, but there was one defector from the gop. >> rand paul opposed the budget on the grounds that it spends too much. he is a small-government republican. now, the big questions going forward, assuming the house indeed takes this senate budget resolution, is what is the nature of the eventual package that is done, and will people be able to swallow at the end of the day the idea that debt and deficits are going to go up by $1.5 trillion over ten years to make these tax cuts possible? the proponents argue that growth will make up some or all of that money, but others are skeptical of that argument. >> yeah. of other votes in the nly got a senate, and you may lose some of those deficit hawks, both in the senate and in the house. >> bob corker of tennessee, who

voted for the budget resolution, said if this final proposal, in his estimation, when they take a count of dynamic scoring, if that adds one penny to the deficit, he's going to be against it. you've got concerns on the left of the republican party, people like susan collins, about both the deficit and who gets the benefits, and you have some concerns on the right as well. >> john, thanks very much. have a great weekend. >> you bet. >> john harwood in washington. and sty that i surprising the . ♪ ♪ well, the president has not yet picked the person to head

the federal reserve, but the white e scenario under consideration. president trump could nominate fed governor jerome powell and stanford university economist john taylor for the two top positions at the central bank, chair and vice chair. it remains unclear which role either might get. there are also reports that the president says he likes, really likes the current chair, janet yellen, likes her a lot. her term ends early next year, and a decision is expected in the next couple of weeks. well, sales of existing homes inched higher in september from august but remained below 2016 levels. a low supply of prices continue to keep a lid on sales nationwide, but there was one surprising exception, and diana olick will tell y >> reporter: at a sunday open house in the nation's capital, things were pr >> i think it's a little bit of the market, the bidding wars, maybe what they've been told is

out there. and maybe the disappointment in not getting what you want. >> reporter: just one couple came to take a look, millennials rachel johansson and angela bracken, who are currently renting a small studio. what they've found so far is just too expensive. >> feeling like we are having to get a little creative. there's definitely stuff available and stuff around. i think it's just going to take, like, hitting it at the very right time. >> reporter: both sales and prices in d.c. are starting to fall for the first time this year. >> i think some buyers have been priced out of the original markets they were looking towards. >> repor hom prices here in d.c. had been hitting record highs in the first half of this year, likely overheating due to the lack of supply. the same is happening in markets like seattle, denver, and much of california, but one surprise in the september sales report, houston. barely six weeks after treceded home sales are up a surprising 4% compared to a year ago, that

after falling 24% in august. some of that may be delayed closings pulled forward, but there is something else at play. >> i think what may be occurring is that there are many investors looking to buy property as is, damaged property, at discounter prices, and there swr some home sellers willing to take that bite. >> reporter: both small investors and large, single-family rental companies increased their purchases, some quite dramatically, in september. while that will help homeowners who didn't have insurance recoup some of their losses, it will not help the fact that supplies of homes for sale in houston and the rest of the nation continue to fall. for "nightly business report," i' diana olick i. sales growth is slow at proctor and gamble, and that's where we begin tonight's "market focus." overall revenue at the consumer products company fell short of expectations as customers pulled back spending on personal grooming products. earnings edged past estimates, and the company said it is on track to meet financial targets for its fiscal year.

p&g faces pressure to increase sales following a bitter proxy fight with the billionaire investor nelson peltz, who's been an outspoken critic of the company's performance. shares fell more than 3% to $88.25. hone raised its full-year revenue outlook after seeing strong performance in its aerospace division was the driver behind higher sales in the latest quarter. profit also rose, and the company reaffirmed its earnings guidance for the full year, and honeywell shares were up 1% to $145.35. schlumberger warned analysts might have unrealistic expectations for the oil field services company's fourth-quarter earnings. the company said results would be impacted by a decline in producer spending in the u.s. in its latest quarter, schlumberger reported a rise in profits and revenue. shares fell 2% on the session to $63.15. well, despite facing service disruptions due to hurricane harvey, regional railroad

operator kansas city southern reported stronger-than-expected profits, but the company said it expects a decline in some shipments in the fourth quarter, cited the uncertainty over the future of the north american free trade agreement. but today, shares finished up more than 1% at $105.19. and now to our weekly market monitor who likes tech, biotech, areas where he sees growth this year and next. back when he was on in october of last year, he recommended facebook. it's up 37%, microsoft, up 38%, and salesforce, which is 40% higher. so, you'd better listen up. he's mark lehman, president of jmp securities. mark, good to have you back. let's go for that kind of performance again, 30s and 40s. how about it? >> you know, look, we can do this one more time, tyler, that be great. the market obviously was -- >> i'm coming you still like facebook. you think it's got more room to run? you're not worried about any

sort of government concerns or regulation of it, among other ? >> i worry about everything. so i'm worried about that as well as other specters, but fundamentals, obviously, are more important, and the fundamentals are advising growth is growing. and like facebook, instagram growing, and the number of advertising really doubling in the last six months, what they're about to do in video. they're going to grow their ebitda by north of 50% in this quarter, and i still think that's a must-own stock that has up side. we have a price 200 for that s expect a good third quarter when they report that. >> a good core holding if there ever was one. you had a couple others in the health and biomedical sciences area. one company i'm not so familiar with is hesperian. tell me who they are, what they do and what you expect from them. >> it's an interesting company that on a very common, unfortunate side of statin

intolerant, people who cannot tolerate statins. we all know the crisis and benefit of statins. they work for people who statins just don't work for, gives people who can't take the normal statins. they're building a drug for those people that we have -- reachi north of $1 billion sales after 2020. it's a really well-run company, somewhere we've followed for a long time. it's had its ups and downs with approvals and regulation, but we expect a good pathway to approval in 2020. it's not a stock you see going up $1 a day. it's something we t has material up side, but you need to be patient, but this is a big audience -- >> but going up $1 a day this past year, it's up n 300%. >> it has. >> should i worry about that very quickly? getti in too late? >> it's a biotech with binary results, but we expect positive results. it's also risen a great deal, it's also down 50% from its peak, but we see that kind of up side if they get the results in the next couple years.

>> wave life sciences, quick thought thou a neuro degenerative disease market. it's not got a market cap as high as we've discussed, but if they get some approvals, some of their peers have gone to a $10 billion valuation. and i'm certainly not calling for that, but you look at the regulatory pathways, many more drugs are getting approved than the complete response letters that takes drug stocks down. we expect good news there. and the biotech index has had great success this year. this is one that if they have of a lot higher. tock's going a >> mark, continued performance for you anjmp securities. thanks again. >> thank you. coming up, second acts. a basketball all-star, and i do mean one of the greatest, his second car. ♪

here's a look at what to watch next week. on tuesday, more big earnings are due out. we will hear from dow components 3m, caterpillar, mcdonald's, united technologies, af dow components will report next week. on wednesday, we'll check in on the housing market with the release of the new home sales numbers. and on friday, the first estimate for third-quarter gdp growth is due out, and that is what to watch on a very busy week next week. well when you think of retired athletes, you probably picture them on the golf course or in the broadcast booth, but not kobe bryant. he's taking his second act to eric chemi introduces us to the basketball legend turned business. >> repor kobe bryant has long dominated the hardwood. now the basketball legend is chasing a new dream.

[ inaudible ] >> reporter: five-time nba champion is the third largest investor in sports drink company. >> in 2025, we want to be the number one sports drink, right? that means we've got to roll up our sleeves and get after it and we've got it make sure that the market and other athletes understand there's a better bodyarmor was created by the creator of vitamin water and smart water, billion-dollar brands that coca-cola purchased in 2007. mike repole is one of the largest investors of bodyarmor. gatorade has long dominated the market, followed by coca-cola's poweraid. they have just 3% of the market, but a new deal and 100% annual growth may mean there's an opportunity. >> a great idea, but if the idea lacks substance, lacks originality,

lack of innovation, you're not going to get anywhere. we have innovation. >> and gatorade hasn't innovated in 55 years. the same beverage that we drank in se liquid in there today. >> but they have other colors. >> yeah. they're called artificial colors, red 40, yellow 5, and who really wants to give that to athletes and children? >> i can call you from a rotary phone, but i'm probably not going to do that. >> the former lakers star says basketball has given him unique access to some of the greatest minds in business. >> elon musk is, i'd say a genius by all accounts. but his commitment and his work i asked him one time about how does he learn, and the amount of research and the amount of study tha he does is unheard of, but he'll always say, the most important thing is imagination. so, you can learn anything that you want to learn, study all these things that you have in a book, but if you don't have your imagination to then take it to another level it doesn't mean anything to you. and i think elon, i sat down and spoke with him for a couple hours. it was really, really a joy. >> kobe himself is much more

than a pitchman. he has coordinated sponsorship deals, leads the creative direction on their commercials, even helps with flavors. whether bryant's skills translate to the business world is yet to be seen, but analysts are impressed with bodyarmor's rapid growth. for "nightly business report," i' eric chemi in >> to read the full interview with kobe bryant, you can head to our website, nbr.com. and that is "nightly business repo" for tonight. i'm tyler mathisen. thanks for watching. have a great weekend, everybody, and we will .

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