Closing Bell - Closing Bell Overtime: Exclusive Interview with Norfolk Southern CEO; Meta Continues Big Tech Strength In Earnings 4/26/23

Episode Date: April 26, 2023

Nasdaq finished higher after strength from big tech and software, but Dow and S&P 500 posted their second straight negative session. Vital Knowledge’s Adam Crisafulli broke down the market action amid another raft of earnings. Meta stock soared in overtime; Bernstein analyst Mark Shmulik and Mighty Capital’s SC Moatti give instant reaction to the company’s strong quarter. Neuberger Berman’s Joseph Amato on what earnings season has told investors so far. Norfolk Southern CEO Alan Shaw joins Morgan in an exclusive interview to discuss the quarter and what’s next in East Palestine, Ohio. Boston Scientific posted a strong quarter; Jon sat down with CEO Mike Mahoney on patient demand returning for elective procedures. Plus, earnings from Roku, Mattel, ServiceNow, Ebay and Teladoc.  

There's a lot of red marks on the scorecard for Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I am John Fort with Morgan Brennan and Mike Santoli is with us here on set as well. In the house. Now get ready for another huge hour of earnings. Our reporters are standing by to bring you results from Meta, Roku, Ebay, Mattel, Teladoc and ServiceNow. Plus, we've got an exclusive interview with the CEO of Norfolk Southern after the railroad posted its first quarterly numbers since that East Palestine

train derailment. But let's start with today's action. Joining us is Adam Christofouli from Vital Knowledge. Adam, I mean, the major indices were down, but, you know, there's some mixed signals. UPS was negative, but Microsoft was positive. Boston Scientific this morning signaling some hope in the healthcare space. How does an investor sort through all this? Yeah, you're continuing to get very, very mixed signals out of this earnings season. I think in aggregate, it's been an encouraging season. You're seeing a lot of companies beat expectations.

You're seeing a lot of impressive margin improvement, which has kind of been one of my big themes in this earnings season, that companies had a lot of unappreciated earnings tailwinds that would help offset macro uncertainty. I guess one critique or one complaint that some people have is that you aren't seeing companies raise guidance by as much as they're beating in Q1, which is an implicit cut to guidance for the back half of the year. I think that's kind of one criticism that some people are giving this earnings season so far, but it's only one quarter in and you still have a lot of uncertainty. So if you're a management team, I don't think you're going to go too far out on a limb, but

I think earnings is really, sorry, go ahead. Yeah. I mean, can you blame them in this environment? No, absolutely. You know, I don't think the management team really should be going out far on a limb. But I think the Q1 results for themselves were solid, especially on the margin front, like I said. So I don't blame earnings so much for what's been happening. I think a lot of it has to do with the debt ceiling and then the ongoing first, you know, the bank uncertainty with First Republic. That's still kind of lurking out there. yeah i i do want to touch on that with you adam because i first republic plunging in today

he saw more negative headlines around that bank even saw trading halted uh... at at one point uh... during the session but we also have gotten results from the other regional names including pac west yesterday which which which much more resilient than investors and it may be expected going into that print to names, including PacWest yesterday, which was much more resilient than investors had been expected going into that print, too. So how to make sense of that and the fact that it certainly seems to be contributing to this very negative sentiment overall? No, absolutely. And I appreciate it's disconcerting to watch a bank, any bank, even if it's a smaller regional trade like the way First

Republic is trading. But I think you made a great point. We're coming out of a week and a half of bank earnings. We've heard from pretty much the entire bank industry. Maybe a few regionals are still to come. And the regionals definitely face earnings headwinds, but it is not facing a systemic deposit crisis like people thought was occurring back in March. The deposit figures, the liquidity figures from pretty much every single bank, very robust. The Fed has introduced liquidity facilities in case there is another panic that occurs. So I think the First Republic situation is relatively contained and isolated. And I think the market kind of is of the same view. But again, it is disconcerting to watch the price action go on. And, you know, I think there's going to be some type of resolution within the next several days,

whether they strike some type of a dilutive deal or the FDIC intervenes. Okay, Mike Santoli, we're about to get some more big earnings numbers this hour. What's been mattering more lately, the top line or the bottom line? Can Meta talk about efficiency more and get investors excited now that it's at

these levels? Or do they have to show that they're doing some stuff with reels and they've got top line growth profitably coming? I think that the cost side does buy Meta and other big tech companies that were perceived to have overhired and been bloated sometime. Now, it is now the moment, though, where they have to basically say the growth story is still intact because flat revenues year to year is not going to cut it at this valuation for very long. In general, though, I think companies know big air pocket surprises with guidance has been, I think, a little bit of a comfort here. And the idea that the decline in earnings by the consensus for the current quarter or even for the full year has been kind of orderly. This is the slowdown we've all seen coming from 10 miles away. And so I feel as if it's getting digested relatively OK as long as it continues in that fashion.

We've had three or depending on how you look at it, four significant equity market rallies since the October low. And it's been a shot up double digit gain, 15 percent. And then you gave back maybe half of it and settled at a higher place than the prior low. So it's been this kind of choppy stair step action. And that's what's continuing. Yeah. And that's why we've had so many different guests on our air that have said the technicals matter just as much as the fundamentals here in this market. I mean, it's tech and everything else. At least today, you had the Nasdaq actually finish the day higher. You had tech stocks in the S&P finish the day higher in what was otherwise a sea of red. I mean, how does that speak to Meta today, Amazon tomorrow, Apple even next week, and the fact that you've had a very top-heavy rally at least here since the start of the year?

Yeah, it's not ideal as a way to design a bull market. It can't really last exactly that way forever. But I would also, again, point today to something like Chipotle. Up huge. It's a similar thing. It's basically people are saying, I'll pay the premium because the story is clean. We think they have a lot of momentum fundamentally and it can work. Now, to your point about the technicals, which I agree. And, you know, when we had that rally in January to February, the most bullish people were the ones who paid most attention to the actual market action and not the fundamentals. They're saying, look at that breadth, look at that momentum. People want the stock. And that's actually fallen away because technically you've gotten much more ragged and the breadth has been poor. So I feel like that's

why there's more indecision in the market than there is conviction on either side. Yeah. Adam, what do you think? What matters more, technicals or fundamentals? I know you've been very constructive on this market. Yeah, I think they're both important. I think at the end of the day, you know, fundamentals matter more to me, at least, which is why, you know, going through all the earnings reports on a really granular basis, really listening to what companies are saying, that gives me a really better insight into kind of the underlying economic trends than necessarily data like the Q1 GDP we'll get tomorrow, which is somewhat stale.

It's an amalgamation of several different inputs. You know, I think commentary from big companies like UPS or PKG, which had numbers out this week, you know, they provided a lot of valuable insight, again, on a linearity, on a granular basis about March being very weak, things improved in April. So I follow earnings. I do think that technicals are obviously very important as well in sentiment positioning, et cetera. But I think at the end of the day, you know, earnings is kind of my North Star at least in trying to divine what's going to happen. Okay. I want to mention Roku, eBay, Mattel, Teladoc, all crossing. We are looking through those to see the numbers, and we'll bring you those as soon as we have looked through them.

Got some movers, though, Mike. Roku doing what Roku does. Yes, yes. Of course, we are still waiting on meta and service now, which, you know, the read-through potentially, Mike, from Microsoft, I mean, I don't know if there is a read-through yet because we're still so early in earnings season. But the hope anyway is that, hey, people are still using the cloud. They're not backing off. Businesses are still spending because, look, consumers are still spending, as we saw from Visa.

Absolutely. You actually also saw the sort of secondary cloud stocks do well today. And one of the arguments for why Alphabet didn't have an excited response is it's not pure cloud AI. And so we're in this phase at the moment where people want certain little slices of the tech industry and not others. We'll see if that proves short-sighted. But obviously with Meta, you know, the advertising color and what they're saying about, you know, even their market share in terms of the advertising side, it's probably going to be more of a swing factor. All right. Well, we're still waiting on some of these early reads. Meantime, you are seeing it on your screen that some of these stocks are popping in the after hours. We're going to get to those details momentarily. In the

meantime, Adam, I just want to go back to something you said. Actually, Julia Borsten has the Roku numbers for us. She's ready to go. Hi, Julia. Hi, that's right, Morgan. We see Roku shares surging after hours after the company's revenue beat estimates reporting $741 million in revenue versus estimates of $708.5 million. Earnings, though, did miss estimates by a penny, the company reporting a loss of $1.38 versus the $1.37 loss expected. But the company's guidance for second quarter revenue is also a bit stronger than anticipated, the company guiding to $770 million in revenue. That's $2 million higher than the consensus estimate. And I also just want to point out that it looks like a beat in terms of the active user numbers as well. Active accounts coming in at 71.6 million. The street had been

looking for just closer to 71 million. So more users than anticipated and a beat on that key revenue number. Shares now up about 7 percent. Back over to you. OK, Julia Borsten, thank you. Quick instant take here from you, Santoli, especially given the fact that there's been focus on, we're talking about cost-cutting with some of the other companies, but there's been focus on that, too, with Roku as we have seen this sluggish ad environment. Yeah, I would call it a relief reaction initially. It is a 10% short interest in this stock. It's been kind of a busted story.

The revenue numbers are still down year over year, both in terms of what was reported and the guidance, but stable in that sense. So, yeah, I think there's a big overarching business model question with Roku still is as to whether it's sort of a transitional technology or it's just going to be there a while. Why a big overarching business model question with Roku and not as much with Netflix or with Disney? I mean, hasn't there been this question overall and whether streaming is a great business model? And yet Roku, in a way, as an avenue, as an arms dealer, as a favorite of users, seems to have less of a question behind it in a way. Well, in terms of the utility, I think that's right. Their place in the ecosystem seems like maybe they don't really own the customer as much. And and Netflix, I mean, it's a question of scale.

I mean, that's the only reason that you can say that Netflix got it sorted out better than than the rest of them. I do think it's about, you know, smartphones. I mean, smart TVs that don't have Roku technology in them do what Roku does. And over time, maybe that's just going to be the way it goes. But I also would compare it to some of the ad-supported streaming bundles that are out there. And that seems like it's going to be a thriving business. And they have a head start in that. Just mentioning ServiceNow, I'm seeing those numbers are now out.

Here's what I see. Earnings per share beats. It's $2.37 adjusted versus $2.04 was the expectation. Revenue also beats $2.1 billion versus $2.08 expected. Looks like for the guidance for Q2, they see Q2 subscription revenues of $2.04 billion to $2.045 versus $2.03 billion expected. So the growth here, interesting, we also see a full year guide, I believe. Let me look for that. That is, give me a moment, they're now guiding to $8.47 to $8.52 billion. That would be 23 to 23.5% growth. And they were guiding before to 23 to 23.5% growth, but they beat

in Q1. The stock is about flat to moving now higher a bit after hours. And I did have a chance to speak to ServiceNow CEO Bill McDermott about the quarter. A little color here. A few things he said to me. One, 18 of the top 20 deals in the quarter came in customer service management. And that's the fastest growing business in the company right now. So to me, that sort of speaks to some of the action that we saw with Visa performing well. Customers are still spending. Consumers are still spending. Also, 18 of their top 20 deals, he said, had five or more products in it this quarter. So they're getting a good bundle thing going. Also, he said, when I look at our pipeline coverage

against the operating plan and the guidance we gave, we have the best pipeline we've had in the history of service now. I also talked to him about retention versus new revenue. He said, and the retention rate is 98%. He said, when you have a great retention rate, you have sustained ACV, that's annual contract value. Then you have cloud economics working for you, which is why we eclipsed $2 billion this quarter in revenue for the first time. But we also got to $2 billion a quarter, more than $8 billion if you annualize it, faster than any other enterprise software company in the cloud ever.

And he pointed out they did it organically. I want to mention Bill McDermott's going to be on CNBC tomorrow morning, squawk on the street, 9.15 a.m. for more on the quarter. But there's some detail for you now. Yeah. And of course, as you're reporting all of this, the stock has reversed course and it's now trading up 2 percent in after hours. Meta earnings are out. Julia Borson has those numbers. Hi, Julia. Well, we see meta shares surging on better than expected top line results. I mentioned earlier that this company was expected to show revenue that declined by nearly 1%. Instead, it grew revenue by about 3%. The company reporting revenue of $28.65 billion versus the $27.66 billion estimated. The company's earnings per share, gap earnings per share,

$2.20. It's unclear if that's comparable to estimates, but we're going through and checking because there are some restructuring charges. A couple other things here about the outlook. They say they expect the 2023 total revenue to be in a range of $29.5 to $32 billion, so that it is a relatively large range there. But they do narrow the expense range, now saying they expect the full year total expenses to be in the range of $86 to $90 billion. Previously, the top end of the range was $92 billion, bringing that down, also saying that includes $3 to $5 billion of restructuring costs. Notably, since there is so much attention to this Reality Labs division, which is the metaverse division, they say we continue to expect Reality Labs operating losses to increase year over year

in 2023. Now, in terms of daily active users, that number did come in better than anticipated. The company reporting two point oh four billion daily active users. Analysts have been looking for just two point oh one billion. So better than expected user growth there. We're going to continue to dive into this and look at some of these severance charges and the like. But the stock is now up over nine percent. Back over to you guys. Yeah. Big move after hours for Meta. Adam, Chris, I fully want

to bring you back into the conversation here, get your reaction to Meta and how it speaks to this broader conversation we kicked off the hour with, which is the focus on margins, the focus on cost cuts, that narrowing expense range to 86 to 90 billion dollars, certainly getting some attention. No, absolutely. For these big tech companies, they took on so much incremental expense during the pandemic. There's so much fat that can be cut out of that. And the margin potential is going to be really impressive going forward. And I think that's for corporate America in general, but especially for these tech giants. And this is probably the third or fourth time Meta has cut that operating expense guidance for 2023.

And then on top of that, you're also now outperforming a little bit on revenue. And that's actually something Google said last night about how they're seeing a stabilization in YouTube advertising, which is a lot of the same advertising dollars that Meta is attracting as well. So if you start to see revenue work alongside the expense progress, that's a really powerful tailwind for these tech mega caps. And we've seen it now, you know, out of two of them at least, Microsoft and Meta and then Google to a lesser extent as well. But that's kind of really the big theme of earnings season so far. Yeah, maybe some more themes developing as well.

ServiceNow moving around still higher, but we're talking, Mike, about potential read-throughs from Microsoft. Enterprise software still apparently essential. The cloud, even though some customers are asking for discounts, the margins seem to be holding up here as well. And then on Meta, as we talked about, it seems like they did a good job sandbagging it. Yeah, Meta, certainly either that or they overachieved what they were anticipating. That's generous. It just shows you how much room they probably had. When you spend a whole bunch of money, you have a whole lot of room to spend a little bit less money.

Exactly. And we're sitting here clapping for $90 billion in expenses at the high end for the coming year. And by the way, the employee count down only 1% year over year as of March 31st. So the kind of latest round of layoffs is not reflected in there. But the initial one was. It shows you, I think, just how much they have the ability to do a little bit more with less. And we talked about, you know, top-line growth would be the corner of the realm in terms of the stock reaction.

And that's absolutely what they delivered. Well, let's get to eBay. Speaking of delivery, the earnings are out. Courtney Reagan, what do they look like? Hi there, John. Yes, we are going through earnings for both Mattel and eBay. We are going to start with you and give you, let's start with Mattel here first. So Mattel actually reporting a loss of 24 cents adjusted here for the quarter. That is a worse loss than expected, but on stronger than expected revenues of $118 million. The street was just looking for $740 million for the revenues. They are reiterating

their guidance. They had given us a bit of a pre-announcement and they are reiterating that. The CFO also notes he expects consumer demand to be positive for the full year and for revenue comparisons to improve. So again, reporting to some improvement in the second half of the year, but still calling out some difficult positions in retail inventory. It does look like shares of Mattel are down marginally on that. And then if we can turn to eBay, eBay's first quarter results reporting earnings per share of $1.11 adjusted. That was four cents better than the street's consensus. Revenue's just about in line to slightly better at $2.51 billion. The street was looking for $2.48 billion. The street was looking for $2.48

billion. They are also giving in earnings guidance that brackets the street at $0.96 to $1.01. And the street was looking for $0.99 adjusted for eBay second quarter. And also the revenue guidance of $2.47 billion to $2.54 billion is slightly better than the street had expected here. It does look like shares are up for eBay by about 5%. They also are saying that their buyers slightly higher than the street had been anticipating at $133 million. Back over to you guys. Okay. Courtney Reagan, thank you. Thank you. Mike, I mean, we've been talking about inflation and pricing pressure. We've also been talking

about inventories. We've certainly seen the toy makers in this particular case. Now, Mattel hit very, very hard during the holiday season, still slogging through with some of that weakness. But the fact that they're putting out or reiterating that commentary, that guidance, that the second half of this year is going to be stronger and they're going to see a recovery. What to make of it? So working its way through a similar story with a lot of the good sector and the idea that, you know, again, as a lot of the consumer companies have said, they feel as if they're not going to have to give back on pricing necessarily, even if the inventory costs start to to roll off. And then, of course, with eBay, there was a, you know, a slight decline, currency adjusted in the

gross merchandise volume. But, you know, this is a it's now settled into being a relatively slow growth, but profitable free cash flow type story on a very cheap stock. So the hurdle usually isn't very high. Quick. OK, we're going to say thank you to Adam. We're going to see you in a little bit. Mike Santoli. Let's get back to Meta.

Results are out just a few moments ago. The stock is jumping. Joining us now is Bernstein Senior Internet Analyst. Thank you. Take care. Okay. It's Senior Internet Analyst Mark Schmollick and Mighty Capital founding partner S.C. Mawady. See, this is what happens. We've got a busy earnings afternoon. We got breaking news. It's very exciting right now. Okay. So, SC Moadi is the shareholder of the company and a shareholder of the company, and she's a former Facebook exec. Welcome to you both. SC, I'll start with you. The fact that you did used to work for Meta and the fact that you do own stock in this company, your initial reaction to the results we just got? Well, I would say it's not surprising. I think the company, just based on my experience on the inside, is very resilient.

They've declared a year of efficiency, and so that's going to position them very well. They have a few things going for them. One is they're aggressively leveraging technology. When I worked there, it was mobile. Today, it's AI. I think that's going to allow them to really win market share in advertising against Google, who's really struggling with AI. And it's also going to allow them to, you know, win against the Apple app privacy policy. The other thing that I think is going great for them is that TikTok is right now under regulatory scrutiny. Now, when I was there, you know, their way to react to competitive spread

was to simply acquire a company like they did with Instagram and WhatsApp. I think it's going to be hard for them to acquire TikTok because of the regulatory pressure. But the fact that TikTok is now under scrutiny is an opportunity for them to basically beat that competition. OK, Mark, how much farther can this run? I mean, we did get top line growth from them, which was in doubt, but we also got expense growth that's growing faster, even though they sort of capped off

what they said they're going to spend. Can this stock continue to run without even more top line growth? Is it still a doubted stock or is the optimism built in? No, I think the optimism is built in, especially on the cost takeout side. I think the year of efficiency is done. Not to say they won't be more efficient, but this is no longer a cost takeout story. This is now if you want to be valued like a growth stock, which is really where the upside is, you've got to be growing. And I think they absolutely delivered that this quarter, you know, and perhaps more importantly than the actual growth rate of three percent for the quarter.

It's the midpoint of the guide, you know, suggests it's going to accelerate up to about kind of seven, eight percent on a constant currency basis. You know, that's the trend you want to see for a company that needs to get back into double digit growth for the stock to continue to work. So given the fact that this is a stock that was up something like 140 percent since the third quarter results that we're seeing is so disastrous by the street when Meta was basically saying they were going to spend even more and continue to double down on on the Metaverse investments. And then, of course, we know reverse course. Do you buy in at these levels or do you wait for a more meaningful pullback, Mark? I mean, the stock's up 10% right now after hours.

No, I think you continue to buy and hold. It's certainly not expensive. It's still trading at a discount to the market. You know, and I think a lot of that was a self-inflicted wound that happened at the end of the third quarter where, you know, investors effectively hate sold the stock because they felt that the management team there really didn't care about things that matter to investors and weren't disciplined enough to kind

of keep costs in check. And we've seen pretty much a full 180 from the company where they've taken out about 10% of their op-ex, something like 14, 15% of their cap-ex that they had effectively committed to. So we've got a much leaner, more efficient company coming off the bottom here. And as I mentioned, still very much not expensive if you believe top line's getting back to double-digit growth. All right, Mark SC, thank you. Speaking of coming off the bottom, Teladoc earnings are out. That stock is up after hours. Bertha Coombs, how do the numbers look? That's right, John. Basically, it looks like a beat on both the top and the bottom line.

The company posting a loss of 42 cents a share. That's above the guidance, the top end of the guidance that they provided. Revenues at $629.2 million versus an expectation of $618.3. And the big driver was their mental health area, BetterHelp. Although the numbers in terms of users came in a little shy at 467,000, revenues in that area were up 21% to 279.3 million. Its U.S. integrated care was up 5% with membership that exceeded expectations at nearly 85 million there. Total visits were 4.9 million. And the company is raising its revenue outlook for the second quarter to 660 million compared to an expectation of about 643. Jason Gorovic, the CEO, saying that they have solid momentum. Back over to you. All right. Bertha, thank you.

Want to mention as well, Teladoc CEO Jason Gorovic, as you mentioned, is going to break down those results tomorrow. Eleven a.m. on Squawk on the street. The outperformance in mental health. I think that's really noteworthy. It is. And of course, this is one of those names, not so different from Roku, that really ran up during the pandemic and has given back a lot of those gains. We'll have more on health as we hear from the CEO of Boston Scientific just a little later in the hour. Looking forward to that. Yeah. Up next, we're going to talk to the CIO of equities at Neuberger Berman,

which has nearly half a trillion dollars in assets under management, about what we have learned from earnings season so far and why he is recommending value still over growth. We'll be right back. Welcome back to Overtime. Let's get another look at earnings. You can see meta after hours still up more than 9 percent. eBay higher as well. Teladoc taking a leg higher, up more than 5%, 6%. You know, quite a bit of movement. ServiceNow also remains up more than 2.5% as we await those calls. Let's look further into strategy. What should you do with your portfolio from here? Joining us now is Joseph Amato from Neuberger Berman. Joe, great to have you back.

So I know you favor value over growth here, but do these results from some of these tech names make you question that at all? Well, I think it's certainly been an interesting earning season over the course of the last number of weeks, right? We've seen companies, whether they're in the producing goods or services, see some of the fundamental dynamics drive their business. So, you know, we see weakness on the good side. We see strength on the services side. So to me, it's not so much about growth versus value. It's about quality. It's about companies that are able to protect their margins in the face of uh weakening fundamentals right when you went into this quarter i think the consensus was roughly two

percent uh revenue growth across the sb500 which with with earnings down about five or six percent so clearly margin pressure was the expectation broadly and that's what we've seen you know for every strong performance by Microsoft or the Facebook numbers you were reporting on or Meta just recently versus some of the things like UPS or 3M that had tough reporting periods. So tell me about fixed income and how retail investors, the folks at home, should think about that strategically. I know you say there's a preference for shorter duration and cash, but you can only do that for a little while. If you're still needing to build into the percentage allocation

that you feel like you ought to have in fixed income, how should you do that in this environment? I think one of the benefits of having relatively high short-term rates, whether it's a two-year treasury yielding close to 4% or other short-term instruments that can give you decent yield, you're actually paid to wait to take risk. One of the concerns we have is that earnings still need to come down over the course of the next few quarters. So in that kind of environment, if you can get paid a decent level of yield and then slowly put money to work, whether it be in longer term

duration fixed income, which also has decent yield, or putting money to work in the equity markets, you have that benefit. You know, if we were sitting here a year ago or 18 months ago, if you had money in cash, you were getting literally getting zero. So you weren't paid to wait. Here you're paid to wait to put money at risk. How does the Fed factor into all of this? I guess, what's your expectation in terms of not a hike next week, but whether we get a hike and a pause? And also, just as importantly, how real is the fiscal risk coming out of D.C. around this debt ceiling right now? Sure. I think the expectation we have is that the Fed will increase rates next week. Not that they should.

I think they should pause. I think the financial stability issues that we've been dealing with, you know, going back a month plus ago and then more recently this week with some of the First Republic disclosures, I think tells me that the tightening of financial conditions that the Fed's been engineering over the course of the last year is, in fact, happening. And it, to me, you know, means they should pause. For all intents and purposes, essentially, the rate hike cycle, in our view, is essentially over. So, you know, it's a time to start thinking about, you know, what is the impact in markets when the Fed stops raising rates and you start putting money to work again. in the context of fiscal risk uh we think the uh debt ceiling is is is going to be a lot of drama

around that uh to me there's only one way and i think there's only one way this is going to end which is the debt ceiling is going to be raised there's only one way it can end uh that doesn't mean there's going to be a lot of drama ahead of that. And we saw a lot of that back in 2011, the last time it was really quite a contentious issue. So I would be prepared for fixed income volatility. Again, another reason that putting money and keeping money in short duration fixed income right now in anticipation of some additional fixed income volatility makes sense. All right. Joseph, thank you. Joe Amato. Thanks, John. Thanks, Morgan. Still ahead, we will hear from the CEO of $70 billion biomedical company Boston Scientific about his company's results and the post-COVID demand for elective procedures.

And up next, the CEO of Norfolk Southern joins us exclusively to talk earnings and the impact from the train derailment in East Palestine, Ohio. Stay with us. Let's turn back to Meta for a moment. Up about 10 percent after hours at the moment. Julia Borsten has more details on the quarter. Julia. Well, John, I just spoke to Meta's CFO, Susan Lee, about what drove the company's better than expected performance, the 3% revenue growth instead of the 1% revenue decline that analysts had expected. She told me that they are seeing improvement in the broader ad market, even though there is still a lot of macro volatility. She also said that they've been investing a lot in improving the performance of Meta's ads over the time, and they are seeing those investments pay off. I asked her about Reels, which Meta has talked about as a big growth opportunity.

She said consumers shifting over to this Reels short-form format continues to be an overall headwind to revenue, but they do expect Reels to be revenue neutral or a tailwind to revenue growth by early next year. Now, in light of the company saying in this earnings report that its Metaverse Reality Labs division's operating losses would be increasing year over year, Lee said that their long-term ambition around the Metaverse is unchanged, and they do believe the Metaverse is an important part of the next computing platform. Morgan? All right. Great reporting. Julia Borson, thanks for bringing us that. Shares of Meta are up about 10% right now in after-hours trading.

Norfolk Southern shares finishing the day lower after reporting results this morning. The railroad reporting adjusted earnings of $3.32 per share, but Norfolk Southern also taking a charge of $387 million in the quarter tied to the February derailment of a train in East Palestine, Ohio, that resulted in the release of toxic chemicals. Joining us here exclusively, Norfolk Southern CEO and President Alan Shaw. Alan, thank you so much for being here. It's good to be with you, Morgan.

I think the last time we were together, it was the first day of your show, and we were on site at the derailment site. I'm happy to come back and provide you with an update. Yes, and I want to get into that. And I think first let's start with that $387 million charge. It includes environmental remediation, reimbursement of the EPA's work in the region. Looks like only $55 million was cash in the quarter. How did you come to that number, and how are you thinking about that reserve over the longer term?

You know, that's the accrual that we know of as of now, what we can identify. It could potentially change. There's no doubt about that. As we work with the Ohio AG and we work with the EPA, I think it also is important to note that it does not include any potential recoveries from insurance or any potential recoveries from third parties. So it'll be subject to change, I would assume. Okay. Remediation efforts, how is that process going since last year when I spoke two months ago? You know, when we were there together, I made the commitment that we were going to do the right thing, and we were going to do more than less, and we've made a lot of progress. We've made a lot of progress cleaning up the site. You know, we had talked about removing

the soil from underneath the tracks. We've already done that under one track. We're progressing under another. And we're focused on community assistance as well and investing in East Palestine to help it thrive. We've got about 300 people, either NS employees or NS contractors, who are there seven days a week really working to help the community recover. When you do talk about investing in the community, investing in the area, I mean, expectations for how long all of this will take? You know, we're going to be there as long as it takes. I'm going to see this through. You know, we said that we were going to do the right things for East Palestine,

and that includes working directly with the EPA. I visited with the EPA administrator, and I pledged my full support. We're working underneath them, under the UAO, and we're making a lot of progress on the cleanup. We're also making a lot of progress in investing in the community, and it's not just writing a check, although financial assistance is an important component of it. It's also our personal involvement.

And I've been back. I was there in the immediate aftermath of the derailment, as you know, and I've been back almost every week since, getting feedback from the community on what we can do to help them recover and help the community thrive. Okay. You've also been spending a lot of time in D.C. You've testified multiple times on the Hill. We've got rail safety legislation that's been proposed by a number of lawmakers as well. Is it inevitable that we're going to see changes to the regulation come to the industry?

You know, as a rail industry, we understand the important role we play in the U.S. economy, and we take safety very, very seriously. And you've seen over time that derailments are down and hazardous material releases are down. We can always do better. And so I've said that I'll take an industry-leading role in advancing safety initiatives. You know, the NTSB's preliminary report said that the NS crew was doing everything right, that all of our safety features were operating as designed, and they're focused on a rail car that the rail industry doesn't own. And so what that means is it's going to require an industry-wide response, which includes customers and rail car builders and certainly railroads themselves.

And I'm taking an active role in that. I'm going to lean forward. And so I've been on the Hill advocating for many of the safety provisions that are in many of the railway safety bills that are out there. Okay. What are some examples of the type of legislation that you get behind? And I ask that because, for example, the DOT-117, the stronger tank car, has been brought up. It's in focus, this idea that maybe you could use that for an even wider range of hazardous materials than currently required. Is that an example of the type of, I guess, regulation that would make sense and ultimately continue to help the safety record of a railroad such as yours?

Yeah, there's no doubt. That makes perfect sense, right? And the rail industry has been advocating for tighter standards on tank cars for about eight years. Advanced notification for first responders. And, you know, as you and I talked about, they were the heroes here. The first responders who rushed to the scene did a lot for East Palestine. And in response to that, we established a regional first responder training facility in Ohio. And thanks to them, expressing our appreciation, right? And it gives us an opportunity to further train first responders from Ohio and Pennsylvania and West Virginia. There's also more R&D for wayside detectors. There's triennial reviews of industry car inspection standards. So there's a number of things that we absolutely are getting behind. Okay. So let's shift gears. Let's talk a little

bit about your earnings, because if we strip out the charge, earnings and revenue actually increased a little bit year on year. But there's a very big focus by Wall Street on recovery of service levels and operations. How much has this derailment affected those service levels? Have you actually ceded market share to CSX or even to some of the trucking companies? You know, we had some tough decisions to make in the quarter as a result of the derailment at East Palestine. One of them was removing the soil underneath the tracks. We had an environmentally accepted remediation plan in place, but the feedback that I got in my listening sessions with the community

was that it made him feel really uncomfortable. And we got some feedback from the EPA as well. And so I went back to my team and said, we're gonna pull up the soil underneath the tracks. Now, recognize that's our premier quarter. It's our busiest main line between Chicago and New York. And so we went from two tracks to one track running at restricted speed. You can imagine that's going to have an impact on service.

We also really accelerated our analysis of our train configuration rules as a result of the derailment in Springfield, Ohio. So we knew that those would have a near-term impact on our financials, but we also knew they were the right things to do for Norfolk Southern and our customers and our employees and the communities we serve. Okay. Final question for you quickly, just your outlook on the macroeconomic situation. A lot of uncertainty. We've had some companies come out and talk about the possibility of a freight recession. What are you seeing from your vantage point? You know, I think uncertainty is probably a pretty good word and it's mixed.

We're a pretty good read through into the economy because of all the different markets that we touch. The consumer certainly is stressed right now from the housing market. And as a result, because of less housing activity, consumers are buying a lot less durable goods. That's the kind of stuff that we ship. And yet, on the other hand, we see a lot of activity and strength in many of our industrial markets, including automotive and metals and export coal. But I think one of the things that gives us a lot of confidence going forward is our pipeline of investments by customers on our lines is near an all-time high. And I think over time, what that tells you is there's a lot of confidence in the U.S. economy

and there's a lot of confidence in Norfolk Southern. Okay. Alan Shaw, we appreciate you being here in the studio exclusively on the heels of earnings. The CEO of Norfolk Southern, Alan Shaw. Thank you for your time, Morgan. A story you have continued to cover, Morgan. Thank you. And meanwhile, biomedical giant Boston Scientific recently hitting all time highs, going back to 1992 when it IPO. Coming up, we're going to talk to the CEO about the post-pandemic demand for medical procedures. Be right back. It has been a jam packed hour for earnings.

Meta leading the pack up right now, more than 12 percent. Meantime, eBay higher as well, almost 4% after beating estimates. Courtney Reagan, you got more details? Hi there, John. Yeah, I just got off the phone actually with eBay CEO, Jamie Iannone. And he says, look, when it comes to the broader consumer, they're pretty much doing exactly what they thought that we would do and we would see from them. There's still a decent amount of uncertainty out there, but we're right on the trajectory that we thought that we would be. Gross merchandise value, that was up more than expected. And the company putting out guidance that's pretty much in line, if not slightly better than analysts' expectations. And then when it

comes to inflation, Iannone says, look, our refurbished category is up double digits as people are looking for a value. But general inflation is pressuring consumer spending behavior. And then lastly, he talked about AI and said that eBay has been using AI for years. And on the upcoming earnings call, he plans to talk about generative AI. He says, so look, you think about we've got a baby that we're going to launch in the next quarter. It's really going to help our sellers write descriptions using AI and kind of taking the friction out of having to describe an item. And he hopes that that will sort of spur potentially more sellers to the platform in this area where resale and re-commerce is getting a little bit hotter and a little bit more broadly

accepted, particularly by younger users. John and Morgan? Yeah, it's fascinating, and it makes me think of the conversation we had with the Klarna CEO yesterday, too. Courtney Reagan, great stuff. Thank you. Thanks, Morgan. Up next, the CEO of medical device maker Boston Scientific on how the return of elective procedures is impacting his company's bottom line. Welcome back. Boston Scientific reported a beat on the top and bottom lines this morning and raised annual guidance. I spoke with the CEO, Mike Mahoney, about patients coming back for elective procedures post-COVID crisis and the impact on his results. In earlier quarters, rivals in the industry have said the return of some procedures was uneven.

So today I would say it's far less lumpy. Many of our procedures are things that need to be done quite urgently if it's, you know, our defibrillators and pacemakers and coronary stents and so forth. And some can be deferred. Maybe our urology procedures or endoscopy procedures or procedures to treat Parkinson's. But I would say to answer your question directly, it's far less lumpy and more smooth in terms of patient volume predictions. It is a $73 billion market cap stock, hit new highs last week. At least one analyst supposing its move today was muted because the company is still on the M&A hunt. Some investors not sure how to interpret that. Also on note, he talked

about the nursing shortage easing somewhat, not helping procedure volume. He also talked about China reopening, helping. He's got a growing business there in geopolitics, so far not derailing it. Medical is different. Fascinating. Well, up next, a roundup of all the after hours movers and what to expect tomorrow when Amazon and Intel report after the bell. Stay with us. Well, it has been another busy day of earnings. Meta up sharply now 12% after topping estimates on revenue and reporting its first sales increase in four quarters. Also giving optimistic guidance.

Roku higher as well, up almost 3%. That's on revenue handily beating analyst forecasts and guidance. That was also strong. Finally, Teladoc. That stock is also moving higher here in overtime, posting a smaller-than-expected loss and revenue coming in above estimates. Guidance was in line. Shares are up five and a half percent. And tomorrow we're going to have another packed day. We're going to get earnings from Amazon, Intel, L3, Harris and Snap.

We're going to have some big interviews coming up as well. We'll talk to the CEO of L3 Harris following those results. And I'll be speaking with Intel CEO Pat Gelsinger after the earnings call. We will bring you that interview on Friday. There was some optimism around what might be happening with PCs after Microsoft, but that's waned a bit. We'll see what he can turn in. That's going to be interesting. And in terms of L3 Harris, we were talking about one of the biggest defense contractors, geopolitics, what's going on, defense spending, and everything that we're seeing with the turmoil in D.C. too.

For sure. And then in the morning before the open, we're going to get a good kind of macro read, I think. Well, not just GDP, right, for the first quarter. We'll see what the consumer did in particular holding up in the first three months of the year. But then Caterpillar and the airlines might color the conversation about what the pace of the current quarter and the coming ones are in terms of the economy. Are we getting into hogs get slaughtered territory for investors who are up in their portfolios now? Well, first of all, not many of them are, unless you own this select group of stocks.

I think not so much. I mean, I think what's interesting is the reactions to Meta, Microsoft, show you that they're good stories, but not bellwethers. Because if they were bellwethers, so to speak, for the overall market, we wouldn't have such divergences. So it still remains a selective, uneven market. And I do think that, you know, we'll see tomorrow if Amazon follows along. And there's been no nasty surprises in the Nasdaq giant so far. So it's really so earnings probably matter more than GDP tomorrow. I think so. Unless GDP, you have the PC inflation number on Friday, too.

So maybe that changes the Fed story a little bit. I think if for some reason there's a negative real GDP number in the first quarter, that's going to get the chatter going as well. But remember, we had two negative quarters last week. By the way, tune in to see. That's right. 6 p.m. taking stock. Mike Santoli. He's going to break down all that market action. In the meantime, this is going to do it for us here at Overtime.

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