NBR Transcripts-May 1, 2008
Thursday, May 01, 2008ExxonMobil's Stock Slides Despite $11B Profit
SUSIE GHARIB: ExxonMobil reported a massive quarterly profit today, nearly $11 billion. But the results disappointed investors and the company's stock tumbled more than 3.5 percent. Thanks to record crude oil prices, the world's biggest oil company earned $2.03 a share in the first quarter, up from $1.62 a year ago, but $0.11 below analysts' expectations. Revenue surged 33 percent to nearly $117 billion, but that figure also fell short of forecasts. Suzanne Pratt takes a look behind the numbers.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: ExxonMobil's $11 billion profit in the first three months of this year certainly seems impressive. On Wall Street, however, that achievement fell short of lofty expectations. Crude oil prices were up 70 percent in the first quarter over last year and gasoline prices also reached new highs. But earnings growth at Exxon is lagging behind, gaining only 17 percent in the first quarter. Consumers and investors may wonder, how is that possible? Edward Jones analyst Brian Youngberg says big oil companies can't fully benefit from a big jump in oil prices.
BRIAN YOUNGBERG, SR. ENERGY ANALYST, EDWARD JONES: Their costs are going up. Sharing agreements reduces the impact there and also on the refining side. They are just not going to make as much money for every dollar that oil goes up as people would really think.
PRATT: In the case of Exxon, a nearly 6 percent drop in oil and gas production also hurt first quarter profits. Nevertheless, Exxon is sitting on about $40 billion in cash and is likely to earn billions more this year. What Exxon does with that money is sparking criticism from Wall Street to Washington. The company plans at least a 20 percent increase in spending on capital and exploration projects this year to $25 billion. Historically, however, it has put less money back into the company than its rivals. Yesterday, Exxon upped its dividend by 14 percent and today, it revealed additional hefty spending on stock buybacks made in the first quarter.
YOUNGBERG: ExxonMobil is buying back at least two times the level of shares each year than any of their peers and that has been a criticism of ExxonMobil in the last two or three years. I do not see that slowing down anytime soon.
PRATT: Investors are supposed to like stock buybacks, but Exxon shares are up only 11 percent in the last year and flat so far this year. Oppenheimer analyst Fadel Gheit, who personally owns Exxon stock, says investors see better opportunity elsewhere.
FADEL GHEIT, OIL &GAS ANALYST, OPPENHEIMER: Investors usually focus on the smaller companies, independent oil and gas producing companies that have no exposure to the refining and marketing business, which has been volatile and has been hurting the companies in the last year or so.
PRATT: Chevron will report its first quarter results tomorrow. Analysts are looking for a 30 percent jump in profits. That would put Chevron in the middle of the pack of its peers, but nicely ahead of Exxon's disappointing performance. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
As Fuel Prices Rise Passenger Frustrations Take Off
PAUL KANGAS: Higher fuel prices are hitting the airlines hard and they're passing those fuel costs along to consumers. The price increases come at a time when the industry is already struggling with customer service issues. Congress is considering adopting a passenger bill of rights. As Stephanie Dhue reports, frequent fliers are frustrated.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stress levels for passengers this summer are likely to take off. Delays, lost bags and cancellations have been common and now there are capacity cuts, fuel surcharges, fees to check a second bag and higher ticket prices. Frequent flyer Kurt Panter is feeling the squeeze.
KURT PANTER, TRAVELER: Changes that occurred over the last years have been really related to just how packed the airlines are, how packed the seats are.
DHUE: Some passengers, like Alan Kugi, are resigned to air travel being unpleasant.
ALAN KUGI, TRAVELER: I sort of had the worst expectations and things have pretty much lived up to what I expected.
DHUE: The frustration isn't new. After being stuck on a runway for hours in December of '06, Kate Hanni created the coalition for airline passengers' bill of rights. She's now part of a Federal task force on tarmac delays. Hanni says airlines should be forced to provide for people's basic needs when flights are delayed.
KATE HANNI, THE COALITION FOR AIRLINE PASSENGERS BILL OF RIGHTS: Food, water and freedom -- we thought those were unalienable rights and obviously that equilibrium was shattered a year and a half ago and people want to know that they have a specific time to get off of a plane.
DHUE: The airlines say they have improved their delay policies. Steve Lott of the International Air Transport Association says government mandates won't improve the situation.
STEVE LOTT, INTERNATIONAL AIR TRANSPORT ASSOCIATION: The last thing we want is Uncle Sam telling the airline industry how to operate their networks, how to operate their schedules. The other thing, too, is that each situation is different. We don't think there's a one-size-fits-all approach to this.
DHUE: The Department of Transportation has made changes, including doubling the amount airlines must pay to passengers who are bumped from oversold flights. It is also considering reducing slots at New York's congested LaGuardia airport and opening up additional airspace during bad weather. But the industry says those changes don't address the key problem of an outdated, over-extended air traffic control system.
LOTT: The air traffic control system is like highways in the sky and like in many big cities across the country, these highways were built many, many years ago and they've reached capacity.
DHUE: Lawmakers have proposed more money to modernize the FAA, but the funding has been delayed by the battle over how to pay for it. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
"Meet the Buffetts"-Peter Buffett, The Youngest Buffett
SUSIE GHARIB: The pilgrimage has begun to see the "Oracle of Omaha". Over the next 24 hours, thousands of shareholders of Berkshire Hathaway will make their way to Omaha, Nebraska, for the company's annual meeting to hear the investment advice of Chairman and CEO Warren Buffett. I'll be joining them, covering the event and I'll have a full wrap-up on Monday night's program.
Ahead of that, we're taking an up-close personal look at the investment guru by talking with his kids: Susie, Howard, and Peter. As we conclude our series, "Meet the Buffetts," we introduce you tonight to Peter, the youngest of Warren Buffett's three children.
Peter Buffett is the creative and musical son of Warren Buffett. He lives in New York and he performs and composes new age music. Peter has composed music for TV commercials and Hollywood movies, including "Dances with Wolves," the Oscar winning movie. But his foundation, Novo, is where he spends much of his time, donating money to help prevent violence against women, as well as funding programs that educate them. Like his sister and brother, Peter is getting more than a billion dollars for his foundation from his father. And he runs Novo in the Warren Buffett style -- low-key; there's not even a sign on the front door. Peter, did your father ever want you to work for his company?
PETER BUFFETT, CHAIRMAN, NOVO FOUNDATION: Absolutely not, never. It was always about find something you love because that's what he does. He does what he loves. And I was lucky enough to find that in music and make that my career.
GHARIB: We've seen your father play the ukulele and sing at Berkshire shareholder meetings. Does he share your love of music?
BUFFETT: Absolutely, yeah. I had to move his car from his parking space at some point not too long ago, a couple years ago. And I started it up and Glen Miller just came flying out of the speakers and I thought this is great. Not only is he listening, of course, it's Glen Miller. He's in his world and that's great because it's great music. But he's listening loud. And I don't think it's because he can't hear. I think is because he was really enjoying it.
GHARIB: Of your siblings you live the furthest from your father. How often are you in touch with him?
BUFFETT: We talk sporadically. Sometimes it's every couple of weeks, sometimes it longer, sometimes it shorter. It kind of depends on what is going on. The most impressive thing about my dad is no matter when you call him up, you never feel like there isn't time to talk. I mean he is always available which I think a lot of people would be very surprised at.
GHARIB: This week we heard interesting stories from Howard and your sister Susie about growing up as the kids of Warren Buffett.
BUFFETT: Right.
GHARIB: What are your most vivid memories?
BUFFETT: My dad was always home at the same time. I really had no idea what he did. But he read a lot. I knew that.
GHARIB: Susie said that your father wasn't as rich and famous when she was growing up. But it was different for you. Did the publicity make people treat you and your family differently?
BUFFETT: No, not when we were growing up. It really happened, frankly, just a few years ago when I moved to New York. And I realized, you know, being his son in New York is sort of like being the president's son in Washington. Something, you know, it's the center of the financial universe and it mattered. And very early on I called him up. And again speaking in those personal ways, I would call him up and say you know, it's weird being here. Because this last name thing is big. I have really never felt it. He said, you know, I hadn't really thought about that. Typical of him, you know, he is not thinking well, of course, that happens to me. He is thinking yeah, I guess you are right.
GHARIB: What is it like walking with your father on the streets of New York?
BUFFETT: It is surprising how many people recognize him.
GHARIB: And what is his reaction?
BUFFETT: You know, he's the typical folksy Omaha guy that waves and smiles.
GHARIB: To what extend do you think that Omaha shaped who your father is and living in Omaha?
BUFFETT: A lot. If he had come to Wall Street and worked for years, it would have been a very different life. He would have been chasing things because other people were chasing them. I think because of his character, he wouldn't have been, but it would have been much harder. Omaha allowed him to have that singular focus and think about what his direction was going to be in the world he was in and not get distracted by all the noise of being in New York.
GHARIB: Here in New York, people who have money like to show it off in a big way.
BUFFETT: Right, yup.
GHARIB: Your father is wealthier than all of them, but he is incredibly modest about it. Why is that?
BUFFETT: My father isn't actually trying to make money. He loves what he does and the money just keeps coming out. The money is the byproduct. And it's a great scorecard. It tells him he is doing a great job and he is the best at what he does. He is not making it to spend it or to make himself happy or look better to his friends.
GHARIB: Let's talk a little bit about your father's $37 billion donation to the Bill and Melinda Gates Foundation. A lot of people in your position would not be OK with what he did. What would your reaction, how did you feel about it?
BUFFETT: I never thought that I should benefit from his success. And maybe I'm crazy. Because I know there are so many people from so many different cultures and walks of life that think that's why you make money, is to pass it to your children. For whatever reason, I thought the opposite. I thought this is his success. It's not mine. He should do what he wants with it. I am thrilled that I am not saddled with this idea that why am I not getting something. Because that can, you know that would haunt me for the rest of my life.
GHARIB: Now the billion dollars that your father gave to your foundation is a lot of money to manage. Did you ask for his help?
BUFFETT: No, I felt that his letter that he wrote to Susie and Howie and myself was clear in terms of what -- why he was doing it and what his expectations were. And it is wonderful to have a father again, that says, you know what, I believe in you. I know will you find the answers. Do it. And do it with complete immunity in terms of, you know, me standing over your shoulder and judging you because I believe in you.
GHARIB: Why do you think your father has been so incredibly successful?
BUFFETT: I think it's because he's removed emotion from his decision- making. He is not colored by anything he thinks somebody else is doing, somebody else might want, some feeling he has about something that might not be rational. Ultimately, it's because he is clear and unemotional, dispassionate about his relationship to those numbers on the page and the information he's taking in.
GHARIB: Be sure to join us Monday for our coverage from Omaha of the Berkshire Hathaway annual meeting.
"Commentary"-The Political Climate & The Environment
SUSIE GHARIB: In tonight's commentary, the importance of climate change as an economic issue. Here's Myron Kandel, president of the New Hampshire Initiative for Corporate Responsibility and Investor Protection.
MYRON KANDEL, PRESIDENT, NEW HAMPSHIRE INITIATIVE FOR CORPORATE RESPONSIBILITY: Members of the media have come under attack during the current Democratic primary campaign for failing to focus on the key issues affecting most Americans in favor of tangential or frivolous matters. Many of the economic issues may not be as flashy as some of the others that get so much attention and news coverage. And that's too bad, especially because the economy and its ramifications are uppermost in the concerns of most of us, according to all the opinion polls I've seen.
And one area that's been badly overlooked is the environment. There probably has been a moment or two on that over the last year of frantic campaigning by both parties, but unquestionably, there's been a big void. Any discussion of energy and its impact on our economy usually focuses on rising gasoline prices and then, of course, there's the cliche about making the nation energy independent, although rarely is that statement accompanied by any specific proposals on how to achieve it.
It's time for the media to hold the candidates' feet to the fire on the burning issues of climate change, degradation of the air we breathe and the water we drink, the sources of the energy we use and other environmental matters that will seriously affect not only our lives, but those of generations yet to come. They need to do this not in a "gotcha" mode, but rather to create an environment for intelligent discussion. I'm Myron Kandel.
Paul Kangas' Stocks in the News
PAUL KANGAS: Those reports on the economy and the Fed's statement yesterday led to some budding optimism on Wall Street today. A solid early rally in the tech- laden NASDAQ spread into the blue chips and continuing weakness in oil futures and other commodities helped the Dow post a 91-point gain at midday, with the NASDAQ up 50 points. June crude futures have tumbled over 5 percent since Monday as the dollar has strengthened and the market's strength this afternoon attracted more buyers and with some added short covering, stocks ended at the day's best levels. The Dow Industrial Average closed up 189.87 points at 13,010 even. The NASDAQ soared 67.91 to end at 2480.71. Standard & Poor's 500 Index jumped 23.75 exactly to 1409.34. In the bond market, the 10-year note fell 9/32 to 97 27/32, putting the yield at 3.77 percent. Most active New York exchange issue, trading 20 million shares, Citigroup (C) up $1.04 on a very firm financial group. Followed by Ford Motor (F) $0.22 gain there.
Bank of America (BAC) rose $1.85.
Pfizer (PFE) edged up $0.33.
General Electric (GE) $0.42 gain there.
Wells Fargo (WFC) up $1.43.
ExxonMobil (XOM), there you see the stock, down $3.37 despite that nice 17 percent rise in first quarter earnings, but $0.11 below the Street estimate as you heard.
JPMorgan (JPM) gained $1.60 in a firm banking sector.
AT&T (T) up $1.23. Starting this Sunday, the company plans to offer mobile TV service in 58 markets with a unit of Qualcomm.
EMC Corp (EMC), tenth in volume, moved up $0.69 there.
Chevron (CVX) down $1.21. Earnings due out tomorrow, but today the company announced it's boosting its quarterly dividend by 12 percent to $0.65 a share.
Apache Corp (APA) $8.27 loss. First quarter earnings excluding one- time items, $2.99. That was $0.07 shy of Wall Street estimates, but up from $1.47 a year ago.
Cigna Corp (CI), the big insurance company, down $1.71. Its earnings sharply lower, first quarter, $0.21 versus $0.98 a year ago.
Cardinal Health (CAH) $3.16 gain. Third quarter earnings moved up to $1.08 from $0.96 last year. Standard & Poor's repeated a "buy" recommendation.
Regal-Beloit (RBC), which makes electric motors and controls, up $5.54. First quarter earnings jumped to $0.97 from $0.80 a year ago, $0.02 above the Street estimate. The company predicting second quarter earnings in the range of $1.14.
Administaff (ASF) up $4.98. First quarter earnings, $0.51, well above $0.30 last year. Revenues rose 12 percent.0
American Axle (AXL) gaining $2.57. Reportedly the company and the United Auto Workers Union are close to a contract deal.
Network Equipment (NWK) down $2.28, huge percentage drop. The company predicting flat or even lower first quarter revenue. The Green Murray (ph) brokerage downgraded it from "buy" to just a "hold" recommendation.
Westlake Chemical (WLK) off $1.51. First quarter earnings, $0.08, $0.11 below the Street estimate, way down from $0.30 a year ago.
And then Clorox (CLX) up $5.24 despite lower third quarter earnings of $0.71 versus $0.84 last year, $0.04 below the Street estimate, but the company is forecasting 2008 revenues to rise a very respectable 8 to 9 percent. That's what helped the stock.
Apple (AAPL) topped the NASDAQ active list, moving up $6.05.
Google (GOOG) in the strong NASDAQ, up $18.79.
Research in Motion (RIMM) up $6.37.
First Solar (FSLR) plunging $28.64. Early in the week it had strong earnings. Today Oppenheimer brokerage downgraded it from "out perform" to just "perform" due to its high valuation, according to Oppenheimer.
Microsoft (MSFT) $0.88 gain there.
Moving along, Cisco Systems (CSCO) with a $1.03 advance.
Baidu.com (BIDU) gained $4.40.
Intel Corp (INTC) up $1.03.
And Yahoo! (YHOO) $0.60 loss.
Hologic (HOLX) had a rough day, down $5.44. Second quarter earnings, $0.22, up from $0.20 a year ago, but $0.06 below the Street consensus and Standard & Poor's downgraded it from "strong buy" to just a "buy" rating.
Finally, Net Manage (NETM), look at that percentage gain, 67 1/4 percent, up $2.79. The news is the United Kingdom firm Micro Focus International is going to acquire Net Manage for $7.20 a share in cash.
And those are the stocks in the news tonight.
