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DealBook Briefing: Corporate Taxes, Musk vs. Buffett, and Will Fox Strike a Deal?

Happy Friday. More on that in a moment. (Want this in your own email inbox each morning? Here’s the sign-up.)

• Profits at America’s biggest companies grew 6.2 percent, driven largely by technology firms.

• Railroad companies are on notice. Elon Musk is coming for them.

• Stitch Fix is the only tech company led by a woman to go public this year.

• 21st Century Fox is courting several interested buyers. But the Justice Department may not let a big media marriage happen.

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Speaker Paul Ryan talks following the House’s vote on tax reform.Credit...Jacquelyn Martin/Associated Press

That is one of the many debated questions. Proponents of the Republicans’ plans argue that companies will invest the money. Opponents counter that firms will return the cash to investors in the form of buybacks and dividends.

Over at Bloomberg View, Tyler Cowen, a professor of economics at George Mason University, says he is no fan of the current plan but concerns about corporate investment are overblown:

“When all variables are measured properly, it seems major companies are paying out to shareholders about 22 percent of their net income. It’s therefore unlikely that new profit, as might follow from lower corporate tax rates, will simply be drained out of the corporation.

“More generally, sending money back to investors doesn’t have to mean no new investment. What if those investors take the money and put it in a venture capital fund or invest it in some other manner? The whole point of capital markets is to recycle resources into the most profitable new opportunities, and that may or may not involve the companies that initially earned those profits.”

The main point of Mr. Cowen’s column: “If those funds are not taken out of the financial system and used to fund consumption, the real quantity of investment in the economy should rise.”

With 95 percent of S&P 500 companies having reported third-quarter results, earnings are on pace to grow 6.2 percent from a year earlier, according to FactSet. That’s up from the 3.1 percent growth rate expected at the end of period.

Technology companies drove much of the growth. The sector reported a 19.7 percent increase in earnings and was the biggest contributor to earnings growth rate. If the tech sector was excluded, the overall growth rate would fall to 2.8 percent from 6.2 percent.

Here are some more takeaways from earnings season:

• Profits at companies that generate more that 50 percent of their sales outside the United States, grew more than 13 percent in the third quarter. Earnings at firms that get a majority of their revenue from within the U.S., rose only 2.3 percent.

That is a reversal of what many analysts expected at the beginning of 2017. A stronger American dollar, a pickup in the United State’s economy, and the Trump administration’s policies were expected to benefit companies with the greatest exposure to United States were expected to benefit more from the Trump administration’s policies, and a stronger dollar. But the United States dollar remained weaker.

• The energy sector reported the largest increase in earnings of the S&P 500’s 11 sectors at 135 percent. The increase is a reflection of how hard the roughly two year slide in oil prices had hit the industry.

• 74 percent of companies have reported profits above analysts expectations, above the five-year average of 69 percent.

• Financial firms reported the biggest decline in profits, down 8.3 percent. That decline can largely be blamed on Hurricanes Harvey and Irma. Insurance companies in the sector reported 63 percent decrease in profits.

• 90 percent of the companies in the S&P 500’s technology sector exceeded analyst estimates.

— Stephen Grocer

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Elon Musk, chief executive of Tesla, revealed the company’s new electric semi truck at a Thursday night presentation in Hawthorne, Calif. CreditCredit...Veronique Dupont/Agence France-Presse — Getty Images

Elon Musk is aiming to reinvent the trucking industry. The Tesla chief executive unveiled Thursday a prototype for a battery-powered, nearly self-driving semi truck that the company said would prove more efficient and less costly to operate than the diesel trucks that now haul goods across the country.

But as Business Insider’s Matthew DeBord points out the trucking business isn’t only one that need worry:

A traditional diesel truck can be operated for $1.51 a mile; the Tesla Semi, he said, beats that with $1.26.

But it gets better. Using convoys — Tesla Semis yoked together with connected Autopilot technology, operating like road-going trains, with one semi as the leader — Tesla’s cost drops to $0.85 a mile.

“This beats rail,” Musk said.

Warren Buffett, of course, has bet big on railroads. In November 2009, his Berkshire Hathaway bought Burlington Northern Santa Fe. It was, he said at the time, a bet on the United States economy as it rebounded from the financial crisis.

At Berkshire’s annual meeting this year, Mr. Buffett was asked about the threat autonomous technology posed to BNSF. Buffett said, according to The Wall Street Journal, that autonomous technology was a threat to BNSF and to Berkshire’s car-insurance business, Geico. But added: “My personal view is that they will certainly come. I think they may be a long way off. But that will depend.”

The online retailer’s shares opened at $16.90, up 13 percent in its first day of trading.

Stitch Fix priced its initial public offering at $15 a share Thursday, well below the $18 to $20 range it had expected. At that price, Stitch Fix raised about $120 million and was valued at about $1.5 billion.

The I.P.O. differs from the typical Silicon Valley start-up that hits the public markets. The company kept its valuation relatively low, and it has generated a profit two years in a row.

But also it differs in another way. It is run by a woman, Katrina Lake. As Recode’s Rani Molla writes, woman-led tech I.P.O.s are “nearly nonexistent.” Stitch Fix is the only tech company led by a woman to go public this year.

In fact, only 4.2 percent of all I.P.O.s in the United States were led by woman from 2000 to 2015. That compares to 6.4 percent of Fortune 500 companies run by a woman.

Let’s come out and say it: 21st Century Fox is for sale — if someone offers the right price.

Comcast is in talks to buy assets like the Fox movie studio and the group’s stakes in the British broadcaster Sky and the Star India TV and digital businesses. Disney has been interested in those as well, and perhaps still is. Verizon was briefly interested, and may become interested again. Sony reportedly is as well.

The reasons are well known: The internet and newer players like Netflix have upended the media and telecom landscapes. Size and scale seem more important than ever. It’s the premise of the AT&T and Time Warner deal, which itself echoes Comcast buying NBCUniversal.

Is all this deal-making going to come up short? In the reckoning of the cable pioneer John Malone yesterday, “it’s way too late” for the industry to compete with Netflix. “The only outfit right now that has a chance of overtaking them would be Amazon.”

More in media consolidation

• Mr. Malone asserted that at least four big telecom companies — including Verizon, SoftBank (through Sprint) and Altice — had approached him about buying or partnering with Charter Communications, which he controls. (NY Post)

• The BBC is considering buying full control of UKTV, its joint venture in ad-supported broadcasting with Scripps Networks Interactive, according to unidentified sources. (Telegraph)

Comments by the Justice Department’s antitrust chief, Makan Delrahim, suggest he’s skeptical of consolidation. In a speech yesterday, he all but laid out why his team might move to block AT&T’s $85.4 billion takeover of Time Warner, even though the companies argue it would be a “vertical” merger that doesn’t remove a direct competitor from the market.

Should the Justice Department sue, its main argument is likely to be that combining a wireless, broadband and satellite internet provider with a major content producer could raise prices and restrict consumer choice. A similar objection could apply to a Fox deal with Comcast or Disney.

Then again: Other types of media consolidation could go through. As expected, the F.C.C. lifted restrictions on a single company owning a TV station, a newspaper and a radio station in the same market. Critics fear that could give companies like Sinclair or CBS too much power.

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Credit...Brendan Mcdermid/Reuters

Exhibit A: Mashable has sold itself for about $50 million — $4 million more than the entirety of the venture capital it has raised over its existence — to Ziff-Davis, according to the WSJ.

Exhibit B: BuzzFeed will fall short of its 2017 revenue target by 15 percent to 20 percent, meaning that it will probably shelve any plans to go public next year, according to the WSJ. Vice is also expected to miss its sales target.

The big issue: As Amol Sharma and Lukas Alpert of the WSJ point out,

Across the industry, digital-media companies are finding that lines of business that caught fire for them early on — like creating custom content for brands — are becoming harder to scale up. Meanwhile, with each passing year, Google Inc. and Facebook Inc. are tightening their grip on the online-ad market.

Extra credit

Univision wants to sell a minority stake in the Fusion Media Group — much of which is the old Gawker empire — for up to $200 million. (Recode)

• Axios has raised $20 million in new financing. (WSJ)

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The leak of 210,000 gallons in South Dakota came days before the Public Services Commission of Nebraska is to vote on a permit for the pipeline’s bigger sibling, Keystone XL.

From Steven Mufson and Chris Mooney of the WaPo:

After his election, President Trump issued an executive order to clear obstacles for the Keystone XL, but TransCanada still needed a permit from the independent, five-person Nebraska PSC. Concerns there have revolved around potential harm to the state’s ecologically delicate Sandhills region and its vast Ogallala aquifer, prompting TransCanada to move the Nebraska segment further east.

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From left, Senator Ron Wyden, the top Democrat on the Senate Finance Committee, and Senator Orrin G. Hatch, its chairman, during a markup of the Senate tax proposal on Wednesday.Credit...Eric Thayer for The New York Times

After the Senate Finance Committee approved a tax bill yesterday, the full Senate is expected to consider it after Thanksgiving. But problems remain.

Among them: analyses that stubbornly find the biggest beneficiaries are corporations, not low-income Americans, many of whom could face tax increases within a few years, according to the NYT. Then there’s the prospect of repealing the individual health insurance mandate. And then there’s reconciliation.

What else have people found in the tax overhaul?

• The Senate bill includes a break for private jets, lowering taxes on the payments made by their owners to the companies that manage them. (The Hill)

• The rollback of the estate tax would affect a very small set of wealthy Americans — about 0.2 percent of the 2.6 million people who died last year left estates large enough to qualify. (NYT)

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Credit...Al Drago/The New York Times

It’s Mick Mulvaney, currently the White House budget director — and before that, a congressman who co-sponsored legislation to shut down the bureau.

What he might do, from Elizabeth Dexheimer and Jennifer Jacobs at Bloomberg:

The goal is to hit the ground running in overhauling an agency that some Republicans have called corrupt and that GOP lawmakers widely blame for burdening lenders with unnecessary red tape. It could be months before Trump nominates a permanent C.F.P.B. director and the Senate confirms his selection.

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A Statoil drilling platform in the North Sea near Bergen, Norway.Credit...Kristian Helgesen/Bloomberg, via Getty Images

The $1 trillion investor is talking about selling all of its holdings in oil companies. That’s likely to give the world’s biggest oil producer, which is working on an I.P.O., some heartburn.

Michael Webber of the University of Texas at Austin told Clifford Kraus of the NYT:

“The Norwegian view is that oil has had a good run and will have a good run for a couple of decades but it’s not the only future that is out there.”

If Norway didn’t invest in an Aramco I.P.O., China undoubtedly would. But Liam Denning of Bloomberg Gadfly offers a note of caution:

China knows that, as demand for oil declines in much of the developed world, ever more of Aramco’s barrels must flow east anyway. So the idea it will buy a big slug of Aramco at anything more than a discounted price — without some sort of sweetener in terms of a low-priced oil supply contract anyway — is a stretch.

“Cough up the cash and you will go home”: The Saudi authorities are negotiating “settlements” with royals and businessmen detained under allegations of corruption, according to the FT, citing unidentified sources.

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Elon Musk, chief executive of Tesla, revealed the company’s new electric semi truck at a presentation on Thursday night in Hawthorne, Calif.Credit...Alexandria Sage/Reuters

It’s made by Tesla, of course. And it’s both battery-powered and almost entirely self-driving.

Tesla also introduced a new roadster. Neal Boudette of the NYT quotes Elon Musk on that new model:

“The point of doing this is to give a hard-core smackdown to gasoline cars,” he said to a cheering crowd of more than 2,000 people. “You’ll be able to drive from Los Angeles to San Francisco and back.”

Courting China: Western auto executives gathered this week in China to introduce more electric models to a major new market for them, according to the NYT.

But Congress is less eager: House Republicans are pushing to repeal the electric car tax credit to help pay for their tax cuts.

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Katrina Lake, the founder of Stitch Fix.Credit...Christie Hemm Klok for The New York Times

The online clothing seller priced its stock market debut at $15 a share, well below its expected range. Is that because while the company is profitable, Jeff Bezos could yet crush it?

It may be a symptom of a wider problem, Michael reports in the NYT:

The challenge that Stitch Fix faces is one that has burdened other start-ups like the food delivery service Blue Apron and the social networking phenomenon Snapchat: incumbent giants that have the money and the hunger to crush upstart rivals.

Retail remains challenged, part 1: Target and Best Buy both disappointed investors with their holiday sales predictions this week.

Retail remains challenged, part 2: Sandell Asset Management presented a preliminary plan to take Barnes & Noble private. The struggling bookseller dismissed the idea.

A contrary view: Walmart and Home Depot have shown that big-box retailers might be able to withstand Amazon’s onslaught, according to Sarah Halzack of Bloomberg Gadfly.

At least, according to this tweet:

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Yesterday we called Nelson Peltz’s (preliminary) victory over P. & G. the “Wall Street version of ‘Dewey Defeats Truman.’ ” Let us elaborate:

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Credit...Photo by Frank Cancellare/United Press International; Illustration by New York Times

• Now that Emerson has raised its offer for Rockwell Automation, the question is whether we’ll see a big hostile-takeover fight in the industrial sector. (NYT)

• Special legislation designed to shield Puerto Rico from its creditors during last year’s fiscal crisis may now be hampering its recovery from Hurricane Maria. (NYT)

• The Metropolitan Museum of Art has received a donation of more than $80 million from one of its trustees, Florence Irving, and the estate of her husband, Herbert Irving, a co-founder of the food services giant Sysco. (NYT)

• Harvard Business School topped Bloomberg Businessweek’s annual ranking of graduate business schools. But it’s Stanford Graduate School of Business whose MBA students are graduating to the highest salaries. (Bloomberg)

• Bitcoin hit another record high just days after a plunge of as much as 29 percent. (Bloomberg)

• Caesars Entertainment plans to buy two Indiana casinos in a $1.7 billion deal just weeks after finishing a large bankruptcy proceeding. (WSJ)

• President Trump has been bad for the gun industry — Remington Outdoor and American Outdoor Brands have become unprofitable, while Sturm, Ruger & Company’s profit has been squeezed. (Axios)

• The E.U.’s top Brexit negotiator, Michel Barnier, believes that Britain’s only hope for a trade deal with the bloc is a Canada-style deal worse from an economic and trade standpoint than what it has now. (Politico)

Each weekday, DealBook reporters in New York and London offer commentary and analysis on the day’s most important business news. Want this in your own email inbox? Here’s the sign-up.

You can find live updates of DealBook coverage throughout the day at nytimes.com/dealbook.

Follow Andrew Ross Sorkin @andrewrsorkin, Michael J. de la Merced @m_delamerced and Amie Tsang @amietsang on Twitter.

We’d love your feedback as we experiment with the writing, format and design of this briefing. Please email thoughts and suggestions to bizday@nytimes.com.

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