♪ this is "nightly business report" with sue herera and bill griffeth. ♪ in the clouds. microsoft trumps earnings expectations but growth slowed in one of its key bus billions a c profits fall and costs rise at boeing as the ceo stands firm, sticking to his time line of getting the 737 max back in t air. caterpillar crunch, sales slumpnd its outlook ugly but investors may be starting to believe the worst is over. those stories and much more tonight on "nightly business report" for this wednesday, october 23rd. good evening, everyone. and welcome. bibi has the evenini off. microsoft is reelicr in the

profits. the most valuable public company in the u.s. easily beat wall street estimates. reportingarnings of more than $10 billion in sales of more than $30 billion both double digit increase from us ay year ago. it may have made its name in the won'ts operating system but the future in the cloud. the cloud business called azure owth in the recent quarter was below 6060 a big number with you one that gave investors pause. the stock volume nil initial after hours trading, josh lipton asore on microsoft's quarter. >> expectations ran highan into microsoft's latest earnings with the stock up nearly 35% so far this year as invtors bet that it's a smart way to capitalize on the shift to clou computing. one b b n nber that investors watch, commercial cloud revenue you go incding azure microsoft answer to riviv aws and cloud properties. commercial cloud revenue clocked

in at 11.6 billion with gross margin spanning to 66%. kirk ma tern says the growth in the cloud is translating into real earnings power. and that he argues should drive the stock higher over the long-term. for nightly business report, josh lipton, san francisco. let's turn to dan ives about the better nan expected earnings. the director of executive research ate had bush developments. thank you for being here. >> thank you. >> i know you were going to be focused on the cloud business. and that seems to be what has investors a little bit worried about tonight. are you at all concerned? >> yeah, i view it as a knee jerk reaction. in continues in my opinion to be a strong report and really one that puts gasoline in the engine in terms of cloud. you look at a 59% growth number. i think what's happening here is microsoft stealing share from aws and for the stock we vow this as something that's still in the early innings and moving

higher. >> the stock as josh mentioned in his report is up about 35%. you're still bullish on the stock what kind of target do you have? and does this percentage increase so far this year give you any pause? >> yeah, we have 160 price target. i think we are only halfway through the move to ovchoud. and microsoft continues to be our bet. if i look at in quarter is gives you billishness to owning this. i view this a a start of what's a massive secular change when the dell and microsoft owning the cloud. >> what about amazon and the competition with in re cloud business? they really still own the space even though microsoft is gaining. >> it's a gat point. i mean, i think the first part of this, bezos and amazon won the first part of the cloud battle. but i think the next part is where microsoft and dell win there. when you lk at the earnings forest for the frees be i think this shows that microsoft is starting to steal share and in

our opinion mix makes us more positive on shares on the cloud story going forward, in terms of the two-horse race between microsoft and amazon. >> if you ar long-term investor as many investors are, would you own both stocks on a kind of hedge your bet as to who wins the cloud war? >> yeah, i mean, right here i view microsoft as my 10-year play on cloud. and that's continuing to be our topic. i view amazon looking at the aws piece that's another name to own in the portfolio. you have 700 to 800 billion spent in the cloud in the next two years. these are the two ways to play it in my opinion. >> on that note, dan ives with we had bush securities thank you. >> thank you. boeing earnings cut in half as the company struggles to recover from the grounding of theop sellingng o 737 max jet liner. revenue slid 20% from a year ago. but that wasn't as bad as feared. the company also said it's sticking with the plan to get

the 737 max back in the air. d that helped lift the stock in today's session. phil lebeau has the details. >> reporte fixing the 737 max continues to cost boeing hundredsf millions of dollars. but ceo dennis muilenburg says the company is moving closer to fixing the beleaguers plane. >> there are tangible milestones being achieved but we have more work to do. last week wela complete add initial dry run of the certification test f ght sfla the certification flight is expectedappen next month. if it goes as planned, the head of the f.a.a. could decide by the end of the year the max is safe to fly. cleerpg the way for scores of 737s to get back in the air. but some on wall street have a different time line for the max. >> we have it returning to service in march. are we changing that because of what the company said in? no this is a company that has a history of overpromising and underdelivering and eventually

they get it right. >> amp cutting production to 42 per month earlier this year. boeing plans to ramp up to 57 per month by the end of next year. while investors are encouraged bofg is close to turning the corner with the crisis, some in congress still have plenty of questions about what went wrong. and next week they'll grill ceo dennis muilenburg during hearings on the hill. >> i anticipate there will be tough questions, challenging questions, a lot of scrutiny. and frankly we support the scruny on the work that we're doing. >> that scrutiny is far from over. regulators from around the world still must be kwon convinced the max is safe to fly. and in some countries like china, that may not happen for several months. phil lebeau nightly business report, chicago. caterpillar is considered a barometer for growth. it said it would not be issues sales guidance because the

outlook is so uncertain. but the stock didn't fall as much as you'd think. in fact rose. seema modi explains. >> the softening global economy is putting caterpillar customers to think twice about buying heavy machinery. the industrial bellwether says dealers were holding off on purchases of equipment not due to financial distress but because of the uncertainty about where the economy goes from here. >> obviously pmary is dealer expectations of inventory reductions. it depends where we end -- obviously the big unknown factor is what is our dealer expectations of future growth going to be at the end of the year, because that will impact their order patent in q 4. >> weaker demand rumted in caterpillar posting the first decline since 2016. energy was weak. the company makes things like pumps and drilling equipment. that softness some experts say is the result rf result of the trade war and slowing global

growth. >> our mines cususmers are cautious and hesitant to pull the trigger on new equipment again though we see increased sales. and improvements in the business. also keep in mind when miner delay that creat opportunities for us for rebuild in parts. >> caterpillar continuing toon deal with ongoing weakness in asia-pacific where sales fell 3%. over time they are confident they can fend off competition in markets like china. >> we are confident in our ability to compete in china long-term and demonstrated the ability to do that. but there will be fluctuations on a short-term basis up or down. that's part of the deal. >> despite the disappointing earnings report some investors are hopeful the company can stage a turn around over time. >> they've done a vy good job, the smort little up cycle we have. keep in mind the industrial upcycle is not great. mining is not great. oil and it was not great. construction okay. not a powerful up cycle the

margins have been exceptional. >> the biggest challenge for caterpillar will be navigatinin the uncertain global economy. for "nightly business report" seem awe modi. >> the earnings were not enough to driving stocks in onene direction or the other. the major averagingng wobbled trading narrowly session throughout the expectation. the dow jones industrial 45 points. the nasdaq added 5 and the s&p added 8. now the hard part making sense much corporate america hits and misses this earnings season. bob pisani here to help lead the y. >> we are about a quarter of the way through earnings season and analysts wonder wonder whether the high profile missessre spelling broader trouble ahead for the overall marke fedex, mcdonald's, now caterpillar and boeing all missed earnings expectations by a significant amount we're talking a miss of 30% by b bing outliar. the misses aren't trivial they may be outliar.

only 15% of customers missing estimates that's roughly in line with the historical trend most of the large miss was company or sector specific. the boeing issues are well-known. fedex h h many company spsk issues look at rival ups boasting strong numbers in the next day air delivery service. they didn't have the same problems fedex had. mcdonald's likely saw signififant traffic dfrpgs around the wholeho chicken sandwich wars earlier in the last few months. competitors like pop eyes. but if the miss is reflecting trends in the broader economy you'd be seeing far more companies missing and overall guidance would be much worse than it is. in leaves caterpillar, the poster child for the trade war and mc. reducing inventory to uncertainty in the global economy resulting from trade tensions. that's their words. and they said end user demand was flat. the caterpillar earnings trends have beenoor more than a year. not j jt in quarter and the fact

gnat suffolk is up today seems to indicate that the street believes t tt caterpillar's earnings could be bottoming. the question now is the global slowdown getting priced? alec young from russell calls in the muddle threw mechanic where investors expect one to two% gdp growth and maybe 5% earnings growth or less in 2020. that's a lot better nan recession fears we had six months ago. for nightly business report, bob pisani at the new york stock exexange >> it's time to look at today's upgrades and downwnades. coke upgraded to buy from neutral at ubs, the analyst site yiet attention acquisition opinion of globa coffee brand and innovovion. the stock rose more than 1.5% to 56 p 64. trachl travelers upgraded to hold from sell at deutsche bank. the analyst saying underwriting margin may be bottoming. the pris target $140.

the shares gaining .5% to 132.1637 walgreen's boots alliance waps downgraded to neutral from overth at jp morgan. citing growth challenges in the near term.m. the prays target is $63. the stock fell 1% to 54.56. and service now was downgraded to neutral from buy at securities the analyst cites the departure of the ceo and broader concern over kbe attrition. last night you may remember we told that you service now ceo is going to go over and head nike. the price target is $230. the stock is down more than 3.5 peppers to 220.01. still ahead, facebook's ceo did not find many friends among lawmakers on capitol hill.

♪ ♪ in the news tonight, president trump today lifted all sanctions on turkey. saying thereill be a permanent cease fire in the conflt between turkey and the kurds in northern syria. the cease fire required kurdish forces to move out of a roughly 20-mile zone on the turk irk border. >> by the moves that we have made we are achieving a much more peaceful and stable area between turkey and syria, including a 20-mile-wide safe

zone. >> the administration says it reserves the right to reimpose the sanctions if ankara falls short of obligations. adding that it's not the job of the u.s. military to police the world. facebook ceo mark zuckerberg went to capitol hill today to anticipates questions about his company'san cryptocurrency projt called libra. and he found himself defending just about every part of his social media network. ylan mui mass me on the heated hearing. >> mark zuckerberg's hearing on capitol hill lasted all day. facebook's founder and ceo fielded questionens on everything from election security and political speech. and democrats were angry and exas per eight zblad facebook changes the rults when it can benefit itself. >> have you learned that you should not lie? >> facebook has been systemically found at the scene of the crime. >> for the richest man in the world to come here and hide

behind the poorest people in the world and say that's who you're trying to help, you're trying to help thoeps for whom whom the dollar is not a good currency, drug tealers terrorists tax evade zbleers republicans were tough on zuckerberg but some cautioned against the broader bibi techbacklash. >> that't' why i believe americn innovation is trial this day in this hearing. >> the focus of the hearing was supposed to be facebook's ambitious plan to launch a cryptocurrency called libra. zuckerberg sayse understands why washington is kept skeptical. >> i get i'm not the ideal messengeror this right now. faced a lot of issues the past few years and i'm sure oomts of people who wish it were anyone but facebook proposing this. forward wh libra without tov approval from i say regulators and he said he would be willing to leave the association backing the cryptocurrency houfrp there will be costs to stepping away.

>> while we debate the issues the rest of the world isn't waiting. china to moving quickly to launch the similar idea in the coming months. libra will be backed mostly by dollars and extend america's financial leadership around the world as well as our democrat values and oversight. but if america doesn't innovate our financial leadership is not guaranteed. >> this is zuckerbergg areas first public testimony on capitol hill in 18 months. he leaned foorpd in seat while listening to questions and answering them. this hearing may be over, but the spotlight isn't going away. for nightly business report, ylan mu y in washington. sales of o of e eli lilly's top selling drugs misses th mark. that's where we begin the market focus. rebates and discounts on a lily's diabes drug trulicity curved revenuend came in shy of targets but the dru make are topped expectations and raised earnings forecast. shares fell more than 2% to

107.40. angst emropes more than 20 peppers thanks to enrollment gains from people enrolled in medicare advantage anddi medica. anthem's 2020 guidance was better thanfeared, easing concerns that did kmaltd medical costs would cut into profits. helping to send shares up to 263.51. norfolk southern with tariff uncertainty and global weakness could impact the coal and steel transport markets. notspg southern shares slipped more than 2% to 184.87. and shares of resid owe technology fell following the company lowering revenue guidance. the smart home and security products company also sai c its cfo will be leaving and it has beguhn gun a kprens. shares lost nearly 40% of value to finish at $9.50. and after. the belel ford postea

lower than expected profit as higher warranty and incentive costs and slowerand i china hit the bottom line. the auto maker also a cut full-year didedens. shares initially fell following the news but closed the regular seseion up about 1.5% to 9.21. also after the bell, tesla shares initially spiked after the electric car maker posted a surprise profit for the quarter. but revenue did fall slightlen from a year ago. and you can see the after hours move after closing the regular session down a fraction to 254.68. well price target hikes are common within wall street but today a couple caught our attention. wells fargo and morgan stanley increased their target on the paint company sherwin williams to $650 a share. now there were only a handful of companiesrading at that high of a dollala amount which got u thinking why the companies kmoos to keep the stock prices high. we decided to examine the

phenomenon in in a segment we call surprising stocks. joining to us talk about in is art hogan, the chief market strategist as national securities. good to see you art. . >> nice to see you thanks for having me. >> sherwin williams was a surprise with the price it trades at. if you broaden it out why would a company companyo choose the keep pinstripes that high insteaddf splitting it. >> it's a great question. on the companyide there is three kind o fundamental reasonshyhe keep that. it's a prestige thing and all of a sudden post the 1999 the 2000 rm time frame when everything fell apart the higher the price is it seemed you are a fansier better company. that's persistent. weave seen that. the sec thing, large institutional investors bay pay by share so they put pressure on companies not to split the price to she don't have to pay as you have in transacting remember in 1999, 2000 ab2008 when prices

came down precipitously if you start lower local and slipped between $10 it was a slippery slope where you might be delisted or the price might be too low you couldn't trade on exchanging or couldn't be in funds. i think that's the three main drivers f corporations. >> for that last one that you mentioned, it could be a defensive strategy. case. >> very much so. >> if the cfo or ceo thinks perhaps the economy is slowing or headed for recession or something along those lines. >> that's generallyhe thought process. . the prestige thing i have a $50, sr. 1,000 stock or the $500 stock there is the large institutional investors saying we are paying by the share and we don't care how expensive it is. and remember in008 a' we got to down to $$5 and the stock price was too low and nobody could invest. knows are the fundamentals. but i don't think knows are great reasons zpla on the other side, one of the reasons that you might want to split the stock i would think that you

broaden out shareholder base. >> absolutely. so human psychology for with whatever reason it's just easier for me to contemplate that a $20 stock is going to 40 and i think i'm buyinin more if i buy it at 20 even though spending $10,000 than if i paid $20 oh a sre and it goes to 400. the kplapgs of going from 20 to 40 easier to grasp as an investor than thinking i i can o to two hundred to 400 appear and that percentage feign is the same, i just believe it's easier for it to happen from 20 to 40. >> right. i believe i can buy more. it's a human nature thing you get more investors saying i can afraid this stock at $20. can't afraid it as $400. >> what about liquidity overall in the stock. >> the more shares you have outstanding, the more likely your smars will trade a lot. i think that that helps in that liquidity if you are a holderer you can get in and out without moving a stock around that that

much when there is more liquidity and volume in the stock. i think there are a whole lot of bfs the largest are psychological for the lower priced stocks. >> thanks art. >> my pleasure. >> art hogan with national securities. coming up why a new harvest may be coming to wall street. >> the most valuable hemp crop in u.s. history being harvested right now. i'm frank holland coming up on nightly business report, i take you inside the growing cbd industry. ♪ ♪ ♪ ♪

>arget plans to add $50 million to its holiday payroll. the retailer wants to ensure it has enough workers on hand during peak shopping times. and focused on free shipping and rewards program gic members early access to door busters. separately wal-mart will fiez holiday discounts onlin this week. in an effort to attct a holiday shoppers early. w wl as you probably know, the trade war has put a lot of pressure on our nation's farmers. but there is a relatively new cash crop that has some seeing green and wall street eyeing a potential new wave of profits. frank holland is in murray, kentucky for us. >> reporter: u.s. hemp production has more than doubled since congress legalize ds the crop last december. as much as $32 wondering of cannabidiol or cbd could be

sourced from this farm in kentucky and others arntd around the country. >> we are growing, harsts, extracting the cbd and put going into brands. >> smoke is let ceo of vertical wellness focused on cbd products manufactured from industrial hemp. vertical wellness aba subsidiary of vertical companies and u.s. based cannabis producer. launched other companies trade in accurate canada. however analysts say the first company trading in the u.s. will benefit from increased visibility. greater investment and more access to capitol. wallin says that's the motivation but unlike higher profile ipos he says the company is already profitable. vertrtal wellness expects to generate $28 million in revenue this year and see the number more than triple in 2020. by selling 75% of the hemp and using5% in its own brands of cbd products. >> right away we are seeing a

profitable company. scaling quickly. so q we -- i don't focus on revenue so much. i know the market is really geared to and seeind of stuff. i focus on driving ebit eu a and cash flow to scale up business profitably. >> it's the same goal for nathan must era tobacco and soybean farmer growing hemp in the the state program in 2018. as after it became legal he planted eight times more. >> on the profits on the hill is in line with the tobacco probably 15 to 20% higher than the tobacco. tand with the corn and soybean it's substantially higher >> hemp is also a substantially cheaper srce of cbd than cannabis farmers and vertical wellness both hoping to capitalize on is emerging cash crop. >> it's about how do you build something truly scaleable and sustainable. >> regulation remains the

biggest biggest hea edwin for the krbld industry. both the department of agriculture and food and drug administration draft guidelines for how hemp can be grown and how krbld can be used inood and drinks. for nightly business report, i'm frank holland in murray, kentucky. and befor we go, another look at the day's final numbebe on wall street. the dow rose 45 points. the nasd up 15 and s&p 500 added 8. that's nightly miss report" for tonight. i'm sue herera. thanks for joining us. and we'll see you tomorrow. ♪ ♪ ♪

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