Closing Bell - Closing Bell Overtime: Seesaw session, After hours action galore, Unity Software CEO on post-earnings tumble 2/23/23

Episode Date: February 23, 2023

Stocks finished the day higher after taking a mid-day tumble, as investors await a key inflation report. Paul Hickey from Bespoke and Adam Crisafulli from Vital Knowledge break down the market setup and react to a barrage of earnings from the likes of Carvana, Booking Holdings, and Warner Bros. Discovery. Analyst David Koning gives his take on Block’s quarterly report. The CEO of Unity Software talks about his outlook for the company after shares fell double digits on soft guidance. Plus an update on the NTSB’s investigation into the Norfolk Southern derailment. 

Well, you got the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort, along with Morgan Brennan. And Morgan, the earnings are going to be coming fast and furious this hour. We got reports from Carvana, Block, Booking Holdings, Intuit, Warner Brothers, Discovery, Autodesk, and more. That's right, and we're going to bring you all those headlines as they cross. Plus, we're going to talk to the CEO of Unity Software, which is falling sharply today on the back of that company's results. But let's get straight to our market panel.

Joining us now are Adam Christofouli from Vital Knowledge and Paul Hickey from Bespoke Investment Group. Adam, you've been saying that dips to 4K or lower should be bought, And that's exactly the right playbook for today. We ended up right around that level. But what do investors do from here, would you say? Add to positions and wait for dips or try to look for the next Palo Alto Networks, the next NVIDIA? Yeah, I think for the broader S&P, dips down to the level that we got to yesterday, especially below 4,000, which we were below briefly, should be bought. I think you're in a tough patch of data right now that has helped

move yields higher. I think we're going to move out of it relatively soon, the next couple of weeks. I think you're going to see more pronounced disinflation set back in. I think you're going to see the jobs momentum fade off of that big, hot January figure. So that's going to help relieve some of the pressure from yields and from Fed hawkishness. And then I think earnings overall over the last several weeks, it's been far from a perfect season. But I think companies are a lot more resilient than they're often getting credit for. I think there are a bunch of underappreciated earnings headwinds that will help prevent really aggressive cuts to estimates on this year. And

then as over the next couple of months, we're going to start to look into 2024 in terms of valuations. And that's when things are going to look a lot cleaner. And so I think dips down to this 4000 level should be purchased. I think the near term ceiling will stay around 4200. But in the medium term and as we move into the spring and summer, you know, I do think that the back half looks more encouraging. Yeah. Paul, how do you see it? I mean, we saw yields under a little bit of pressure today. We saw tech stocks really leading the rally. The Nasdaq, the best performer of the major averages, up almost 1 percent today, perhaps not surprisingly on the heels of Nvidia. And then the subsequent move higher we saw in other chip stocks as well. Earnings not as bad as feared.

And does that create a little more of a tailwind given all of the negative sentiment we've seen in recent weeks for this market? Yeah. So, Morgan, I think if you look back at this earnings season, what everyone was expecting to be a complete disaster wasn't so bad. You saw the earnings beat rates now that earnings season is done. You saw it weaker than the last few quarters, but still above the long-term average. The revenue beat rate was above the long-term average. And guidance, you would have expected to see horrible guidance coming from companies, but it wasn't out of the norm from what we normally see. And that just goes against the narrative of what we saw coming into the earnings season.

So it was a very big surprise. And I think the most surprising aspect, if you look at your screen right now, is that the NASDAQ is up this month. The S&P is down about one and a half percent. That comes in what is normally a weak month for the markets. But also, more importantly, the pause that everyone has been waiting for has been pushed way further out on the horizon. So I think in that respect, you have to look at take a step back from the market and think with all of these bad headlines coming out there, why is the market holding up there that then it should be given the headlines?

And that just goes to show that investing based on the headlines is never the approach you want to take in investing. It's just on a road to ruin by following that framework. Yeah, it was looking particularly rough for tech to start the year. I remember talking to you about that in early January. Right now, Paul, we're right near those levels that the Nasdaq rebounded to in late November after that big sell-off in early November. So in tech right now, do you believe Tuesday's tumble, today's modest rally? I know you say you can't follow just the stock price, but even based on the fundamentals we've seen from earnings so far this week, how much do you believe that? I think you've seen some good news,

especially in a high multiple stock like NVIDIA going up so much today, especially after it's rebounded so much. That's a story with the whole AI play. That's one thing. But we've seen other companies doing well here. And the fact is that while you have some areas of tech with very high multiples, you can find other areas that aren't so rich. And in the broader market overall, you look to the small cap space. Small caps in the S&P 600 are trading at about two-thirds the multiple of large caps, trading about 13 times earnings, which when all the talk about how high valuations are,

you have small caps with relatively attractive multiples. All right. Hold on just a moment. Warner Brothers Discovery earnings are out. Stock moving lower about 4 percent. Julia Boorstin's got the numbers. Julia. John, stock moving lower and revenues falling short of expectations coming in at 11.01 billion versus expectations of 11.36 billion. The company reporting an earnings per share loss of $0.86. We're not comparing that to estimates for now, but I do want to point out a couple of key areas here. Direct-to-consumer subscribers. So the company announcing it as 96.1 million DTC subs. That's just a hair less than 96.3 million expected.

But one thing that's notable here, one bright spot, though the stock is down 2.4 percent, is that the losses for the DTC division were much less than expected. There's always a lot of conversation about how much these media companies are spending on their direct-to-consumer business. Loss of 217 million for that DTC division. Analysts were expecting a loss of $571 million, so much smaller loss than anticipated. No forward guidance here, but just want to point out average revenue per user in that streaming business, $7.58, just below the $7.65 estimated. I'm looking for that forward guidance. I'm sure we'll get some more on the call with CEO David Zassov. Shares now down about 3 percent. All right. Julia Borsten, thank you. I

want to bring it back over to the panel. Adam, I mean, you look at what underperformed today. It was communication services within the S&P and Netflix was down almost 3 percent on those headlines that it was cutting or it is going to cut subscription prices in some countries to boost the numbers. Then you get this report. I realize we're still going through some of the details here, but how does it speak to, I guess, some of the uncertainty around this area of media and this area of the market that was until more recently high-flying and where now it's all about the path to profitability. It doesn't really matter about growth anymore. No, absolutely. I think there's certainly a little bit less emphasis on just raw subscriber

figures. I think for Warner Brothers specifically, it's in a little bit of a unique situation in that it has, among the large media companies, one of the worst balance sheets. So I'd be very curious within this Q4 report to see the free cash flow number. I think that's by far the most important number in the entire report. I think the consensus on free cash flow was, I think that's by far the most important number in the entire report. I think the consensus on free cash flow was about $2 billion plus, so a very big number. You know, if they fell short of that, and then depending on what they say on the call, you know, that's going to be a lot more disappointing than if they miss on streaming subs by a little bit. I think cash flow is something people are really watching for with

this company, just given the balance of stresses that it faces. Well, the earnings results brigade is upon us. Booking Holdings earnings are out as well. Seema Modi has those numbers. Hi, Seema. Morgan, a better than expected report from Booking Holdings. Earnings of $24.74 adjusted. Revenue above $4 billion at $4.05 versus the estimate of $3.89 billion. Gross bookings, $27.3 billion. That is better than the BTIG estimate of 26 billion. And just for comparison, seeing growth of about 44 percent year over year versus Expedia, which in the fourth quarter saw gross bookings grow by 17 percent. So that just gives you some context as to how big of a beat it's seeing in terms of growth in gross bookings for booking holdings. China and its exposure to Asia will be a big topic on the earnings call, which begins at 4.30 p.m. And CEO Glenn Fogle in the earnings release saying we are

encouraged by the continued strength and resiliency of demand for travelers last year and into the new year. Clearly a consistent trend we've seen across the sector. Morgan. All right. I'll take it, Seema. Thank you. Adam, I don't know if you've got any thoughts on how do you sort through how much is just revenge travel and the shift towards services here and the quality of some of these travel companies, travel tech companies. You know, I also think that they you know, they went through an extraordinarily stressful time during the pandemic. So they're coming out of that stronger, leaner. But clearly, you know, the strength that we've seen in travel. So booking go back to Airbnb, all the airlines, the hotel companies, all of them have been very bullish. And it's kind of a corollary of what you saw today with companies like Domino's or Wayfair or Yeti or all these other consumer companies that are levered more towards hard goods, discretionary spending. You know, this big shift in the consumer wallet from goods to services continues.

And you can see that reflected in, you know, the results that we just got out of booking and then Airbnb a couple of weeks ago. So unclear how long, you know, this pent up demand will last. You're probably pulling forward a little of it, just like during the pandemic, you had a big pull forward of hard goods demand. This is certainly probably pulling forward a little bit and it could create a little bit of pain next year. But, you know, for now, travel is extremely strong and the whole industry is benefiting. I'm going to I'm going to stay on this this theme, Paul, because the shift that we have seen, and we've seen in the macro data too, right? The shift from goods to services.

You saw it in earnings reports and commentary from companies even just earlier today, particularly on more of the retail side. The fact that there's cautious outlooks afoot. Travel stayed really resilient. At some point, if we're talking about an inflationary environment where prices are still elevated, where travel is concerned, which seems to be the case on a monthly basis, do consumers start to push back on that, too? Yeah, I mean, I think we were I was just looking through. We saw one survey spring break travel plans. People have adjusted their plans into this year because of the high prices. I mean, they're still going.

Don't make no mistake about it. Just everywhere you look, the areas of the economy that are strong are in services, employment, leisure is the strongest sector in there. So that area is on a big rebound right now. And it's probably got more to go at least through this year. But then as you get into next year, these companies are going to start facing the same problem that a lot of these hard goods and work from home stocks faced last year and are facing now, tough comps. And that's going to have to work itself out going forward. You saw Warner Brothers Discovery having trouble, these streaming companies. That area of the market, there's a very cutthroat area. Interest rates are higher. It's going to be very expensive to produce content. So these areas that did so well are still facing an adjustment process while the travel and leisure stocks are doing well.

And I think they may have more to run. But, again, you've got to focus on some of these valuations and look ahead to a year from now. Will, like you said, Morgan, still be willing to pay ever higher prices for these higher costs of leisure? All right. Well, gentlemen, stay with us because we're going to bring in senior markets commentator Mike Santoli over at the market dashboard at the New York Stock Exchange for a closer look at a key inflation read that is on the way. Speaking of. hi, Mike. Yes, Morgan. Hi. Tomorrow, we get the PCE consumer inflation numbers. Those are the ones that are directly looked at by the Fed.

They're in the Fed's models, and that's what represents the Fed's inflation target. Now, the Fed, of course, has been chasing inflation for the better part of a year, just about a year, and has just about caught it if you look at the comparison of the Fed funds rate, which, of course, is the one the Fed controls relative to the core PCE inflation rate. This is a longer term chart, goes back more than 20 years. And you see that we've gotten this massively steep tightening cycle. It's brought in the upper bound of Fed funds right now to 4.75 percent. And that is slightly above the last reported core PCE level. Now, tomorrow, you're expected, based on economists' forecast, to see a little more improvement in the inflation rate, core PCE projected at 4.3. So just a real

incremental decline. And I think there's a lot of discussion as to whether, in fact, there might be an upside surprise because of some stickiness and some methodology issues. But what you'll see is in past cycles, the Fed did get the Fed funds well above the inflation rate before the overall cycle. And this was two years or so before you got to a recession. That's been the case in the past as well. And look at the long period of time where Fed funds remain below a low inflation level back in the 2010s. It shows you what a radically different world this is now. If inflation starts to really decline toward the 2 percent target, you're going to find the Fed funds being very restrictive. And it's slowing down the economy as expected and creating a higher real interest rate yield that people will necessarily believe is both going to do the job on inflation and maybe bring inflation risk,

but doesn't, I mean, recession risk, but not necessarily on an immediate basis, guys. Love this chart, Santoli, because this is it. This is the whole debate around sufficiently restrictive and just how quickly disinflation can continue from here, especially given the fact that we have had these stronger and hotter than expected reports in recent weeks that have surprised everybody. Without a doubt. And it's interesting because now that so far, as far as we can tell, the Fed is on this pace of perhaps a few more, a couple more quarter point increases. What it means is you get a quarter point every meeting. That's every six or seven weeks. You're always going to have another inflation reading between the meetings, sometimes two. Right. So that means it gives inflation time if it's going to go down on its own from here to actually moderate more. And so the Fed doesn't

have to do as much on the rate side. So that's the phase we're in right now where they've already done the sprint. Now they're doing kind of the jog to maybe complete the move. How good does the news have to be, do you think, to counter some of the rough news that we've had for those who are hoping that the Fed's going to ease off, including that hot jobs number and, of course, the hot CPI? It's got to be good, but not too good. If you're talking about the pace of the economy itself, you do see some sensitivity to hot labor numbers like the low unemployment claims out there. But really, I think if the Fed is going to be pausing, I've never been of the view that the stock market really needed the Fed to outright be cutting rates later this year to remain relatively well supported. It just

needs the Fed to kind of find where it's going, stay there for a bit, and then be data dependent from that moment on. And, of course, if we immediately dump into a recession from there, not good for stocks at all. But I don't think that's necessarily too imminent at the moment. Let's hope not. Mike Santelli, thank you. Meanwhile, we have a news alert on Boeing. Our Philip Boowe has details. John, take a look at shares of Boeing, the company confirming also what we have confirmed through the FAA,

that the company has suspended deliveries, halted deliveries of the 787 Dreamliner while they do further inspections on a fuselage part. Unclear when they started halting deliveries, though. It has been reported by the Wall Street Journal that the last one that was delivered was in late January. But again, this is a part of the fuselage, a component that Boeing is doing further analysis of. And at this time, they have not suspended production. It's simply deliveries of new Dreamliners. Now, they don't deliver a lot of them every month. Remember, they halted production all the way up through May of last year, was halted for about a year while they were working with the FAA on documentation and analysis of inspections

for new planes as they are built. This is completely separate. This is analysis of a component within the fuselage that Boeing is doing. And until they have finished that analysis and they are comfortable and the FAA is comfortable with what the analysis shows, they are halting delivery. So that's the story with Boeing, guys. Well, we know you'll keep an eye on that as the situation develops. And of course, it comes in the same day that you just spoke to Airbus' CEO just earlier today, speaking to that competition right there. All right. Want to also get Carvana from Phil because you have those results. We're dancing here. We've got a number of things on our plate.

Take a look at shares of Carvana. The number that we're we're going with here is a loss of seven dollars and sixty one cents, which is far worse than the estimate of a loss of $2.28. And by the way, the most dire prediction from an analyst for the quarter was a loss of $4.27. So we're crunching those numbers again to make sure that what we have, a loss of $7.61, is in fact what the company reported for the fourth quarter. Revenue falling shy of expectations, coming in at $2.84 billion. The street was expecting just over $3 billion in revenue.

But again, there you see shares of Carvana down a little under 4% on a loss on both the top and the bottom line. Guys, back to you. All right, Philip O., thank you. You bet. This time for real. All right, I want to bring it back over to the panel. Adam, your thoughts, whether it's on Boeing or Carvana or perhaps more pressingly looking to the market tomorrow, PC, which we know is the Fed's favorite gauge of inflation? Sure. So I'll quickly I'll try to touch on all three on Boeing. You know, demand for aircrafts is off the charts, just as we're seeing in travel. Orders that are being placed for these companies are extremely strong. Boeing in particular has had a lot of manufacturing supply chain issues, which is preventing them

from really capitalizing on it. And this is just another example of that. On Carvana, the situation is a little bit like Warner Brothers. I'm curious to see the cash metrics within the report. You know, the EPS number probably has a lot of noise in it, but, you know, this is a company that has had a lot of liquidity concerns surrounding it. So it would be very interesting to kind of see the cash momentum, cash dynamics, and then any commentary they have on liquidity on the call. And then finally, the PCE tomorrow.

So the PCE is the last major number of the month that we get. So we start with jobs. We get to CPI, PPI, import-export prices, and then the PCE. So all the data for January has been very hot. I think people anticipate the PCE to be very hot as well. But most people are kind of moving on now to the February data. And that doesn't hit for another two and a half weeks or so. So the February jobs report arrives on Friday, March 10th, which is a little later than normal. It's about a week later. And I think that's the number of people are really watching now

is kind of what happened in February versus January. All right. And, Paul, give you the last word on what we've seen so far. Still got earnings coming out, but, you know, a little bit more muted in terms of how exciting they are. No NVIDIA yet today. Well, so I think, you know, Adam just summed up everything coming after hours. But I think two things worth highlighting. Look at tomorrow, the inflation expectations in the Michigan confidence report, inflation expectations on the part of the consumer have been pretty well

behaved and they've been coming in. So that's positive. Look for that trend to continue. And as Mike was talking in his prior segment, the level of interest rates is very important, but just as important is the direction and how fast they're moving. And if we can get some stability in interest rates, that's a sign that we're sort of at an equilibrium level as opposed to the Fed rapidly increasing rates or rapidly decreasing rates, which tells you they're behind the curve in either direction. So I think even if you get a flat level of interest rates going forward and you get some data that support maybe a pause or 25 basis points, markets can do well with that. All right. Thank you, Paul. And thank you, Adam, for joining us. Up next, we're going to talk to the CEO of Game Engine Unity Software, which is giving up a

big chunk of its gains on the year today after guidance missed the mark. You can see shares finished down 16%. We're back in two. Stay with us. Welcome back to Overtime. Block earnings are out. Steve Kovac has the results. Steve. Hey there, Morgan. Yeah, look at shares of Block falling here after a miss on EPS. 22 cents versus 30 cents expected for EPS. Revenue was a slight beat, though, $4.65 billion versus the $4.6 even billion that the street was looking for. And then as far as Bitcoin on the balance sheet, I know we'd like to pay attention to that. The fair value of that is $133 million. You see shares now down about 5%. The call begins at 5 o'clock, and we'll have more for you right then.

Morgan, back to you. All right, I'll, back to you. All right. I'll take it, Steve. Big mover. I know you continue to watch it. Meanwhile, shares of Unity falling sharply on the back of its results came out last night. The game engine and kind of app ecosystem platform saw upside in the fourth quarter on revenue and margins, but investors focusing on the guide, which mixed revenue expectations. Joining us now on a first on CNBC interview, Unity CEO and chairman John Riccitello. John, you didn't talk a lot about the ecosystem headwinds, about Apple making things more difficult to target as being a problem for revenue going forward that you're overcoming.

You talk more about the economy, but how much of it really is that targeting challenge? You know, I think that's really in the past at this point. You know, we're dealing right now on the ad side with, you know, some headwinds that are more economic driven. But just for clarity, you know, we had our first profitable quarter as a public company last quarter, beat expectations on revenue. We guided for the year for $300 million on the top side for profitability, well ahead of street expectations. And so our first quarter, we guided very conservatively in sort of a period of economic turmoil. What we're talking about right now is pretty straightforward. We're doing sharp cost containment to make sure that profitability and cash flow comes through for our investors.

And market share growth. It's a little hard for us to predict on the ad side in particular what the state of the market is. We're calling it stable, and we feel good about that. How much of the revenue, the conservatism that you're taking toward that guide also has to do with your being focused on protecting that profitability and those margins which are coming up? Well, look, this is one of those wildly philosophical thesis points. But look, every now and then the market goes through the kind of a gyration that's going through right now. I personally think that's healthy. It puts us in a position to get our costs at a level such that when the market does recover, we can have explosive and profitable growth on the backside of that. Now, we're still guiding to strong profitability even without that.

Our assumption going forward is no recovery for 2023. I'm hopeful it can be better than that. But we're able to hit that strong profit note with a conservative guide. And we can do better than that if we start to see market recovery. So, John, just to dig through where the profitability comes from, I know you started in gaming. And certainly last night we heard NVIDIA say that they're expecting a rebound in their gaming business. But you've also been diversifying to other industries as well. So where are you finding the most opportunities in terms of that profitability? Well, first off, we have two divisions, Grow, which is around user acquisition. It's more ad-driven. And Create is the tools that they use to create new products, whether it's a game, a digital twin, a replica of the city of Orlando, for example. We're seeing strong growth create

almost regardless of the economy. There's interest in gaming. We're seeing growth there. We grew over 100% in industries outside of gaming last year. So the industry side took off really well. Where there's headwinds is in the advertising business. It's often said, first in a recession in the ad business, first out of a recession is the ad business, is you go from fear to greed looking forward because it's frankly hard to read. I mean, a few moments on your own show, you were showing graphs on interest rates, et cetera, that look like a Rorschach test. I mean, it's just hard for people to see through them. And because they can't see through it, I don't see there's a whole lot of benefit in us anticipating something that we can't be sure about. Hence, conservative guide, making sure

the expenses yield the right profitability with that conservative guide and being ready when the market recovers to really deliver on the top line and the bottom line. So then, John, tell us about the payoff on iron source, which already seems to be doing pretty well for you. But that's that part of that grow business that you acquired. There's a weird situation where Applovin was trying to get you to fall in love and you said no. But to what degree are those customers who need efficiency, even in a tough ad environment, going to migrate toward a solution like the one you have versus that solution is just going to suffer in the macro? Now, one of the things we pointed out yesterday on earnings call is that we're seeing market share gains today in the market, but they all don't drop through to revenue in the first quarter. Customers move to our platform, and then there's a period of

engineering integration before the revenue kicks in. So we're already seeing early signs of people coming to our platform, market share gains that speak wealth for the long term. But in an area where you've got to engineer the migration of their games onto our platform, the revenue takes a little bit to materialize. And hence, we're showing stronger revenue growth year over year in the back quarters of this year than in the first quarter of this year. All right. That conservatism, which the street is reacting strongly to this week. We'll see how it turns out. John, thanks for joining us.

Thank you. Now, after the break, we're going to get an analyst take on Block's report and what it says about the state of fintech and consumer spending. Plus, I spoke with Norfolk Southern CEO, Alan Shaw, on his first sit-down interview following the East Palestine train derailment

and subsequent release of toxic chemicals that happened earlier this week. And I asked him about the cause of that accident in Ohio that happened earlier this month. We have a lot of confidence in the NTSB. We're looking forward to seeing the results. Well, the National Transportation Safety Board's preliminary report out today, sooner than expected. We're going to tell you about the key findings next. Welcome back. Autodesk earnings are out and the stock is down just over two and a half percent. Might be a bit of a head scratcher because it looks like at least in line, if not a bit of a beat, revenues came in at 1..32 billion versus $1.31 billion expected. Adjusted earnings per share came in at $1.86 versus $1.81 expected. But one thing that caught my eye here was the guide on full-year billings.

That came in at $5.025 billion to $5.175 billion, the street was looking for $5.173. So the high end of the guide, just barely what the street was looking for. So that might be what the cause is of the stock being a bit under pressure. And tomorrow, I'll note, we're going to hear from Autodesk CEO Andrew Anagnost here on overtime. So we'll get into these issues of the guide. Morgan, see how much conservatism plays into that versus other issues. Right. With people designing buildings, other infrastructure, which is, of course, Autodesk's core business. That seems to be the word of the day, conservatism.

And of course, it comes on the heels of another similar, we'll call it a peer company that also reported and was one of the best performers in the S&P today, and that was Ansys. That was up 10.5%. We'll check out shares. Speaking of earnings movers, a block. Fourth quarter numbers are out just a few moments ago. You can see shares are popping 2% now in after hours. And for instant reaction, let's bring in R.W. Barrett's David Koning. He has an outperform rating and an eighty five price dot eighty five dollar price target on the stock.

David, thanks for being on your initial takeaway from the results we got in the report just a few moments ago. Yeah, thanks. So EPS, a little disappointing. That was just on a tax rate. Seller decelerated a little bit. That was just on a tax rate. Seller decelerated a little bit. That was expected. The big positives, Cash App crushed it. They accelerated meaningfully well above the street. And January and February trends accelerating very nicely. The street's modeling deceleration in Q1.

So I would think the stock should be up nicely tomorrow. All right. How much does Bitcoin matter to this name? Because we have seen it become one of those stock proxies for whatever the price of Bitcoin is doing. And I realize it's only just a part of their business. Bitcoin mattered when when Block was at 250 bucks at 70. It just doesn't matter. It's 4 percent of gross profit. I haven't even looked closely at it. That's how much it matters. Understood. All right. Well, David, thank you.

We're going to be watching for that conference call. Thanks, guys. Maybe they should change the name back to Square. But for now, time for a news update with Bertha Coombs. Bertha. Hey, John, here's what's happening at this hour. President Biden plans to meet virtually tomorrow with the leaders of the G7 countries and Ukrainian President Volodymyr Zelensky on the one-year anniversary of the Russian invasion. The White House also says President Biden will announce new sanctions against Russian individuals and entities. This afternoon, the United Nations General Assembly passed a non-binding resolution

calling Russia to end its military operations in Ukraine and to withdraw its forces. That vote was 141 to 7, with 32 countries abstaining, including China and India. And in Paris, the Eiffel Tower is lit in the blue and yellow colors of the Ukrainian flag. At a lighting ceremony, Ukraine's ambassador thanked the city for its support. Amazing milestone, Morgan. Back to you. Bertha Coombs, thank you. The National Transportation Safety Board releasing its preliminary report faster than expected on the Norfolk Southern train that derailed in East Palestine, Ohio, resulting in the subsequent release of toxic chemicals. In a press conference this afternoon, the NTSB saying the cause of the accident was an overheated wheel bearing.

And Chair Jennifer Homendy saying so far no signs of operational issues with the hot box detectors that are installed along the tracks that ultimately alerted the crew to stop the train. No sign of track defects and no evidence the crew did anything wrong. But it's just the start of this process with regulators even taking the rare step of launching an investigative hearing. What are we investigating that's preventable? Pretty much everything about this accident. It's everything from the wheel bearing to the rail cars, to the tank cars, to the actions of federal entities or inaction of federal entities. We'll look at state entities. We'll look at locals. And of course, look at Norfolk Southern as well. Earlier this week, CEO Alan Shaw sat down with me in East Palestine for his first interview in the wake of this environmental disaster. And I asked

him if the accident has already affected the way he's staffing the railroad and thinking about investments into the network. We're going to figure out what caused this and what we could have done to prevent this and we're going to learn from it and we're going to make changes based on that. Does there need to be a change to the way that hazardous materials moved by rail are classified as some lawmakers and by the way from both parties have been suggesting in recent days? You know I'm anxious to see the results of the NTSB report, and we're going to sit down with the regulators and those lawmakers and figure out what

the best solution is to make the rail industry safer. Just getting a statement from Norfolk Southern in the last few moments on the heels of this NTSb report a very lengthy statement breaking down some of the the results and what we've heard um today already but the company going on to say that it's now inspecting all of the nearly 1 000 wayside heat detectors on its system those hot boxes on top of the regular inspection that those detect those detectors go through every 30 days also saying that norfolk southern will develop practices and invest in technologies that could help prevent an incident like this in the future, that they will work with the owners of the rail cars on the integrity and safety of the equipment they use as well, because that is now very much in focus, the state of the rail cars. And of course, you are just the person

at this network who I want to be talking to to try to understand this. Is this really about, of course, primarily it's about the safety of the people of East Palestine, but from the corporate perspective, margins? Because the workers have been arguing, hey, Norfolk Southern and others, you're understaffing here. We need more backup people on these train cars. You're cutting corners in certain areas. And this was bound to happen. And the company is largely, it seems to me, have been saying, we got technology coming that can do the job here. Do they? Is it really the workers gaining an upper hand, perhaps, in this argument? I will say as this investigation has

been unfolding, you've certainly had lawmakers, politicians, unions coming out and very much increasing the scrutiny on and the speculation around this accident, but increasing the scrutiny on, for example, precision scheduled railroading, what's called PSR, in which most of the rail industry has adopted in recent years, including Norfolk Southern. And the idea of PSR is to basically run longer trains, cut costs, cut workforce and be able to, through that process, increase service and with it profits. That was already under scrutiny with the pandemic and the fact that you had rail networks that couldn't de-bottleneck fast enough, given everything we were seeing play

out. It was in scrutiny with that, you know, almost labor strike we saw coming into the holiday season just a few months ago. And now, of course, for better or worse, it's in focus here. But as this investigation plays out, what is not clear is just how much a strategy such as that and the headcount specifically played in the possible prevention of this derailment. I do know from Shaw and the conversation we had earlier this week, and I've had this conversation before, Norfolk Southern, and by the way, the other railroads, they've actually been hiring. They cannot get enough workers right now and hanging on to those workers. So we'll see. There's more questions to be answered. Yeah, and a lot more than dollars

at stake. Again, health and safety, but dollars too. Now coming up, the IPO market has been largely frozen for the past year, but is a thaw in the forecast. We're going to ask Wedbush's head of investment banking next. Capital markets kind of dried up. When are we going to see those numbers get better? Soon. How soon will capital market activity really come back? Let's bring in Webb Bush, head of investment banking at Berk Dempsey, who is on set with us. Welcome. Thank you for having me here. It's great. You agree with Jamie Dimon soon? Soon. But you have to look back over the last year. It's been pretty dismal. We're down 80 to

90 percent, whether you measured it on deals or on volume. And this first quarter so far year to date, it's looking a little bit better. But I think, you know, you've got a situation here where you've got a standoff between buyers and sellers. You know, companies wanted 21's prices still and investors today want 23's prices because they're a little uncertain. So I think when you see some year end audits come through, which you're seeing now, and then you also get to some hardboard conversations that are going to be had, I think you're going to see some action.

So I think he might be right there. So in terms of deal-making specifically, do you expect to see more companies come public this year? Or do you think there's going to be more M&A? How are you assessing the landscape? Well, if I go back in time, the standoff usually takes six to nine months, and it's been through cycles. I've been through them.

And I think what will happen next is that we're going to end up starting with things like convertible preferred restructuring type deals, because you've got to get people sort of out of the mud first who are in there. You've got to stabilize things. People are cautious right now. So if you do a convertible preferred, you give somebody a preference over the common, and you give somebody a nice yield, and you give them some equity upside. It's a little defensive and it has a little upside. So I think that's what people want to see right now. You just saw that Bath & Beyond do quite an amazing one. And at the same time today, Southern companies did one.

One company was a D-rated company and one company's investment grade. So it's something for everybody. The next, unless you had a question, the next thing you're going to see is spinoffs and split offs, which is the beginning of an IPO kind of trend where people have an embedded company and they need that they can get better valuation for it than their whole company. So we work with them to spin it out. Maybe we JV it, maybe we sell it all the way. That's another one. And well, I think that's where it goes. I do have a question, but I also really wanted to hear what you had to say about that. And my question is, where does private equity fit into this equation? Because end of last year, beginning of this year, when things looked really ugly, they were licking their chops and you saw them coming in,

taking out a lot of tech companies. But it seems like it's been quieter lately as the market has turned up. So does that mean it's they stay quiet if the market doesn't tank again? Or is there a recalibration and reentry you think we're going to see? There's a couple different things there. Private equity is always looking. We bankers are always talking to them every week, all the time. At certain times, their ability to pay is not as good as a corporation's. Corporations have the strategic ability to merge, get consolidation

savings, et cetera, et cetera, that some private equity firms don't. Now, private equity firms over the last number of years have gotten bigger and they have platform companies. So they're semi strategic. But the final part that private equity likes to do, they like to use some leverage. And so they need their banks to cooperate. Well, the banks are sitting on some loans when interest rates went up that are upside down. So they really don't necessarily want to jump right back in that game again. So I think that's that's kind of what's happening. That's why it's a standoff. We've obviously seen this huge downdraft in public markets in the past year plus, not so much in private markets. And I realize there tends to be a lag effect. Do you going back to sort of your first question in

your first comments? Are you seeing that start to catch up in the private markets now? Yes, people are a little more rational, but some of these smaller, there's all sorts of private companies. There's hundreds, thousands of them. Right. And so I think there is a little bit of denying reality because they can do that. But I think as you're seeing these board meetings go for public and private companies and we're working on some where they're saying no mas, there's no more money, make it work. So that's going to push some of these companies into a deal or do something down round. No one wants to do that, but that's what's going to take to get back to stability. All right, Mark Dempsey, thanks for joining us. Thank you. All right. And we gave you a little bit of Jim Cramer's interview with Jamie Dimon there at the top. We've got a lot more coming up 6 p.m. on Mad Money.

It's been a busy day after hours. A lot of earnings. We're going to tell you about the $100 billion market cap company that's pulling back when overtime returns. Take a look at shares of Intuit moving lower right now in overtime. It's been up and down a bit after hours ahead of the call. The financial software company handily beating estimates, reporting earnings per share of $2.20 X items versus the streets, $1.44. Meanwhile, revenue came in at just over $3 billion.

Estimates were for $2.91. The company also announcing a CFO change. Sandeep Singh Aujla will replace Michelle Clatterbuck, effective July 1st. And we're going to hear more on this. You're going to hear from CEO Sasan Ghadarzi on overtime tomorrow. Morgan, we're getting the bottom of all of these. In case you haven't noticed, we're going to have a very busy Friday afternoon. Up next, the boom and bust of two companies that took big ticket purchasing experiences online, and one of them just reported earnings. Mike Santoli is going to break down the charts when overtime returns.

Carvana higher after earnings, reporting earnings. It's more than doubled this year, but it's still down, get this, 90% from its peak. We're going to talk about the rise and fall of that name and another stock that's made similar moves next. Let's get another look at Carvana because those shares are up about two and a half percent after hours. Senior markets commentator Michael Santoli is back with a breakdown of the boom and bust. Michael. Yes. So obviously ugly results from Carvana, but not too different from expectations. But let's span back to the middle of 2020.

I guess we're going back to the open door IPO or when it first came public. That, of course, is a company that promises to buy or sell your home very quickly in a very up to date e-commerce way. That's the same thing Carvana is doing for you for used cars. And you see very similar paths here now, not exactly synced up, but essentially a 300 percent move off of that starting point at the peak. And now we're kind of bumping along the lows. Now, yeah, Carvana is more than doubled off that bottom. But it shows you deep skepticism about the viability of this business model. And, of course, Carvana has some debt outstanding that yields massive in the 20 percent, 30 percent area.

So clearly lots of overhang on these on these stocks. But right now, looks like Carvana managed to sneak through without incremental worries from this report. Yeah. All right, Mike, thank you. And finally, some news today out of the White House. The Biden administration nominating Ajay Banga to be the next president of the World Bank. Banga is a face probably familiar to many of you. He stepped down as MasterCard CEO in 2021. This comes after current president David Malpass announced his resignation last week after months of controversy. The former

treasurer and chief investment officer of the organization, Afsaneh Beshlas, lists some of the top priorities the new president should consider in an op-ed out this week in the Financial Times. And she's going to join us on tomorrow's show to discuss all this and more. Morgan? It comes at a key time, given the geopolitical landscape, given the global economic landscape. I'm going to be very interested to hear what she has to say about that and also about markets tomorrow.

And some of it has to do with global warming, and the world banks need to take that on. I'm really curious about the financial underpinnings of that, which Asana is so good at, because I know that sometimes gets bandied about as a political thing. Well, we're going to have to ask her all about it tomorrow. That's going to do it for us here at Overtime. Fast Money begins right now.