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The Morning Ledger: United Outrage Unlikely to Hurt Bottom Line

17 Apr 2017 11:37 am

By Rheaa Rao

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Good morning. A tweet, a video, an advertisement can hurt a company's reputation, but the damage is seldom seen in financial statements, CFO Journal's Tatyana Shumsky reports.

United Airlines faced scathing criticism after a video of a passenger being dragged off one of its flights went viral. PepsiCo Inc. pulled an advertisement after it was deemed culturally insensitive. Earlier this year, Starbucks Corp. came under fire for its decision to hire 10,000 refugees globally. Yet these kinds of events are rarely disclosed to the Securities and Exchange Commission because they typically are not considered material.

United Continental Holdings Inc. will report first-quarter earnings after markets close today. Tuesday's conference call will offer insights on how chief executive Oscar Munoz plans to handle the crisis and win back customers.

"There's no way that [refunding] one flight would be material to United's total financial condition," said Trent Gazzaway, national managing partner of professional standards at accounting firm Grant Thornton.

Still, these events require finance chiefs to assess the potential for a material impact down the line. Consumer-facing companies are especially vulnerable to social controversies and should outline risks and response strategies in financial filings, said Nell Minow, vice chair of corporate governance consulting firm ValueEdge Advisors.


Upbeat outlook for ZTE after strides in U.S. market. ZTE Corp. is the only Chinese handset maker that has done relatively well in the United States. U.S. regulators have been tough on the company, but analysts forecast a better outlook as reports first-quarter earnings today.

   -- The U.S. government releases housing starts data for March on Tuesday. 
      Economists predict a 3.9% decrease from the previous month, a dip from 
      the previous month. New single-family construction hit a 10-year high in 
      February spurred by warm weather and rising demand. 
   -- Vice President Mike Pence and Japan's Finance Minister Taro Aso will 
      discuss trade on Tuesday. 
   -- Japan is expected to release merchandise trade data on Wednesday. Imports 
      are likely to rise 8.2%, faster than an expected 6.9% increase in exports, 
      according to economists. 
   -- On Thursday, The World Bank and International Monetary Fund will start 
      conducting meetings with central bank leaders. The list includes Bank of 
      Mexico head Agustin Carstens, Brazil's Ilan Goldfajn and the Bank of 
      England's Mark Carney. 
   -- The market for home sales has been mixed this year, as rising home prices 
      dampen activity. The National Association of Realtors will release data 
      on existing-home sales for March on Friday and economists expect a 1.6% 
      increase in sales. 
   -- U.K. retail sales data, released on Friday, is likely to indicate caution 
      amid inflation, modest wage growth and Brexit negotiations. 


Neiman Marcus learns that even wealthy shoppers want better deals. After continuously raising prices for a decade, high-end chains are learning that even their wealthy clients are looking for better deals both online and in brick-and-mortar stores.

Wells Fargo board faces high-stakes vote. A majority of Wells Fargo & Co.'s directors could be voted out, a rare occurrence for boards of big companies. As the bank's April 25 annual shareholder meeting looms, executives are preparing to meet with investors and grapple with the likelihood that some of their re-election attempts may be rejected.

CalPERS to change way it invests in private equity. The California Public Employees' Retirement System, the largest public pension fund in the United States, is reconsidering how it invests in private equity. Possible changes could slash payments to Wall Street managers.

Apple gets green light to test autonomous vehicles in California. Apple Inc. received a permit from California's Department of Motor Vehicles to test its autonomous vehicles in California. The move is a sign Apple is going beyond testing the cars on private tracks and is working to improve how its systems work in the perilous terrain of human drivers.

Facebook faces onslaught of fake news ahead of the French election. Facebook Inc. has been struggling to keep pace with fake news despite ramping up its efforts to curtail misinformation. It has already vetted more than 30,000 accounts in France ahead of the country's presidential election.

Nintendo's console has a strong start in the United States. Nintendo Co.'s new game console got off to a promising start in the U.S. after its launch in March. This assuaged concerns analysts and investors had about pricing.

Whole Foods looks to slash prices but keep its image. Whole Foods Market Inc. faces intense pressure from investors who want bigger profits. The company is now looking to cut prices without compromising on its ability to be on top of latest food trends and niche brands.
   Ant Financial raises MoneyGram offer.   Ant Financial Services Group, an affiliate of Chinese e-commerce giant Alibaba Group Holding Ltd., increased its offer for U.S. money-transfer firm MoneyGram International Inc. to nearly $1.2 billion, Reuters reports. It had previously said that it would consider raising its offer only if a competing bid was higher. 

Anbang-Fidelity deal may fall through. China's Anbang Insurance Group may give up acquiring U.S.-based Fidelity & Guaranty Life Insurance Co. for $1.6 billion after the deal faced regulatory hurdles, Reuters reports.

Saudi Aramco CEO optimistic about oil demand. Amin Nasser, the chief executive of Saudi Arabian Oil Co. said that he doesn't believe global demand for oil will plateau. He warned that producers will have to add capacity to meet the accelerating demand. Some of OPEC'S biggest oil producers--Saudi Arabia, Iraq and Kuwait--are targeting $60 a barrel in an effort to help their economies grow and increase energy-industry investment.

BP well stops leaking oil. BP PLC's Alaska well stopped leaking oil on Sunday but continues to release natural gas. The well started to leak on Friday and it still isn't clear whether the spill impacted the nearby tundra.

Jared Kushner to sell stake in real estate tech company. Mr. Kushner, the son-in-law of President Donald Trump, is in the process of selling his state in WiredScore to a venture-capital firm, in a move to unburden himself of business ties as he moves up the ranks in the White House.


Randal Quarles to be named to bank-supervision post at Fed. Randal Quarles, a former Treasury Department official during the George W. Bush administration, is likely to be President Trump's nominee for vice chairman for bank supervision at the Federal Reserve.


Uber posts a loss. Uber Technologies Inc. posted a loss of $2.8 billion last year. Its fourth-quarter revenue rose 74% from the previous quarter's $2.9 billion. Uber isn't a publicly traded company and hasn't previously disclosed its financials.


Emerging market turmoil has investors jittery. Now may be a dangerous time to own emerging market stocks, write Saumya Vaishampayan and Ira Iosebashvili. Even though $60 billion went into developing market during the first months of the year, "worries are setting in that the buying spree has resulted in lofty valuations as geopolitical tensions escalate."

Fed works on plan to unwind securities portfolio. The Federal Reserve is devising a plan to whittle down its portfolio, a process that is likely to start this year. The move could ease pressure on the possible new leader in 2018 when Fed Chairwoman Janet Yellen's term ends.

U.S. retail sales fell second consecutive month in March. U.S. retail sales fell 0.2% in March from the previous month, the Commerce Department reported on Friday. February sales were revised to a 0.3% decrease from an initial 0.1% gain. This is the first time retail spending has declined for two consecutive months since the first two months of 2015.

China's first-quarter growth surpasses expectations. China posted 6.9% growth in the first quarter, its fastest pace since the third quarter of 2015. It exceeded its annual target of 6.5%.

Stanford's Dave Donaldson wins the "Baby Nobel." David Donaldson, who studies international trade, was awarded the John Bates Clark Medal or "Baby Nobel" for the nation's most promising young economist.

President Trump to nominate ex-lawmaker to head Export-Import Bank. Mr. Trump said he would nominate former U.S. Rep. Scott Garrett to head the agency. Mr. Garrett has previously voted against renewing the charter of the Ex-Im bank.

The Morning Ledger from CFO Journal cues up the most important news in corporate finance every weekday morning. Send us tips, suggestions and complaints: kimberly.johnson@wsj.com.

(END) Dow Jones Newswires

April 17, 2017 07:37 ET (11:37 GMT)

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