tv Squawk on the Street CNBC July 26, 2017 9:00am-11:00am EDT
hold on. what else would he say after consultation with my generals. >> time is up. make sure you join us tomorrow we'll have the answer on squawk on the street. a big day of earnings with coke. europe is green. oil is coming off the biggest one day rally of the year. begins one beat earnings giving a boost to stock as we said,
coke, ford and earning all vernings beats. >> the deal that were to happen would be worth well let's call it 2,515 billion comcast should buy verizon we did get an update erngs report from at&t. >> mcdonald's expanding it's delivery program steve easterbrook is here in the house and will join us live at post nine to discuss the 787, the orders are amazing. this is a company with just a level of cash flow that people were surprised by. a couple of quarters last when
people got very kpietd aexcited conference call began and the air went out of the balloon and that's not going to happen this time and the operating cash flow which is what i think has been the hall mark of this whole quarter. revenue growth instead. >> the previous ceo was fan fantastic. he is talking about a new product. and remember it's been going down when i talked to him this morning i felt terrific about it by the way, we talked about the value dollar, coca-cola at mcdonald's and howell that's done i had to of course talk to mr.
easterbrook. couldn't resist but at the same time he is committed to being soft drink and water -- he's committed to being beverage. i asked him, you have the fire power now because you have done this refranchising you have a fabulous balance sheet is it time to move out of beverage no, no, and no and i tried to get him to go in a pepsico way he is going to make acquisitions and you're going to see them rather quickly david hopefully when you're in but i do think that. >> what do you mean? >> they took that stake in green mountain. >> monster as well. >> this was not my -- i said is it time to go outside of beverage and he said oh, no it's going to be within the beverage family.
want to be more diverse identified but even they're not doing as badly because of this new form i mean the business is going to generate a lot of cash flow. the guy has a lot of chances to do a lot of different things i believe he gave him a great hand should the stock be bought on this it's not a quarter like a mcdonald's it's not a quarter that's like a boeing but people are still -- i like dominos here. but dominos had very weak uk how about mcdonald's having the best in 43 years so it isn't like that. somebody is taking share from somebody. >> we're going to talk to
easterbrook in a few moments ford is the other big one at the moment there is some tax in there although pick up sales were strong. >> i looked at ford and i was thinking, got out of europe in the bottom and then i look at ford's numbers in europe and they're not there. saved by the truck i just wish i had something more positive to say about ford but i don't think it matters who is running it right now you want to kill your story, have her be your ceo. >> she's a downer, huh >> i had the largest parts company on -- he does a lot of work with gm he's talk about good numbers overseas and things are okay but then it's like okay let's get some campbells soup and peanut butter and be able to last for a long time i read that and i said she is prepared for the apocalypse.
this is a company, these two companies, their narratives are so negative that i almost believed that we're done buying cars or that maybe it's an electric car situation or economist driving and people are waiting for those. it is a pause. except for trucks and that's the small business that's doing better. >> u.k. also, right? 2040 now getting rid of the combustible engine >> that was going to drive the oil futures down but last night we had a big draw down but that's going to be -- we're going to deal with oil as a declining prospect now still 81% of the world is fossil fuel as it was 20 years ago but if you mandate it, well then you're going to have to start thinking i got to own a tesla. >> it's going to happen in 23 years one would expect
>> he does continue to say after consultation the u.s. government will not accept or allow transgender stroijs serve in any capacity in the u.s. military. our military must be focused on decisive and overwhelming -- still waiting on part 3 here but that's what the mystery was for a good ten minutes or so well i have a specific comment about that and i thought it blew the numbers away. >> that's where we are moving on to at&t they lost 199,000 subs but t city arguing that comcast should buy verizon. you heard david mention the size it would be. their argument is gets you beyond the home. they argue the regulatory
environment is more amenable than pass administrations. >> you can't dismiss something like that. a descent analyst. the barclays analyst also mentioned something like this. that guy predicted at&t time warner i was looking back to my notes jim. that's months ago. would it ever happen he puts a 65% chance on it. >> could he have done the same thing with t-mobile. >> yeah, verizon is challenged in a lot of different ways at&t the earnings the stock s'up. >> it's a good quarter. >> it was a good quarter. >> while we're talk about this. >> did you see at one point he said that people want game of thrones on their hand held maybe the more visionary than i
thought. >> the bundling does seem to be working. churn was low and directv now added 152,000 subs which is offsetting the declines at directv itself. >> there say belief that bundling is helping reduce churn which is a basic idea there. >> it was okay take a look at what we have done it made me feel good about time warner i see what they have got going they're about getting subs from others using intellectual property as opposed to magenta they want to create stickiness with the things they can offer you from a certain extent.
nobody is talk about walling off hbo. back to comcast verizon, we'll see. there's a lot of verizon as we know is challenged on the top line what will it do? will it do a large deal? would it ever consider selling and would our parent company want to get that much bigger you can make arguments that it makes sense even on the economics of it there are ways to get to the number that makes sense. the fact that this guy says there's a 65% likelihood. >> would you argue that 65 is kind of like code for it could be 48%. >> by the way. >> 67. >> i would have gone 67. dish is now lower to a 30% chance of verizon by that and is lower to a sell. >> come on we should probably go. >> yeah. >> we do have to go because we want to make time for the ceo of mcdonald's steve easterbrook is with us here on post nine. we'll talk earnings and more
plus jim got an exclusive with the head of citigroup after holding his first investor day since the crisis we'll hear sound from that in advance of mad money tonight nasdaq is up 12 of 13. dow needs 68 points at the open for an all time high we're back in a minute experience advanced safety technology at the lexus golden opportunity sales event before it ends. choose from the is turbo, es 350 or nx turbo for $299 a month for 36 months if you lease now. experience amazing at your lexus dealer.
>> it is great to have you back. >> thank you, good morning. >> last time you were here we talked about increasing guest count and you're doing it even as some of the initiatives are literally getting off the ground. >> it is early days but we always said the fundamental measure of success is serving more customers more often so initially 8 quarters of growth it's just fantastic but really it's underpinned by resinating the customers in a more meaningful way and we have begun to do that. >> people talk about discounts on beverages upscale burgers. are any of those more important than the other >> it's a combination of all of the above and more we have been investing in the menu and ingredients and food and quality taste. we lost our way on value so getting a great value to drive customers in but part of what is
important behind that is you want to drive customers in as they actually see the differences. whether it's in staff and training and the service although it's in the physical real estate you're the president and you're the leader but you have this congress and you have to work to get them to buy in. how did you do that so quickly and tell people what it means when you have the buy in versus when you don't. >> what we have to do is instill some trust, some excitement, some confidence. confidence in our leadership and as they invest themselves there's opportunities for them that takes a lot of collaboration and we invest a lot of time in that. as the momentum grows the confidence fwr
confidence grows and as confidence grows this mojo returns and it's a spirit within that makes us more confident to continue doing what we're doing. >> on your conference call we have to recognize that this is also a technology company that serves burgers you use this term. tell us what it is. >> so eotf is experience of the future and i guess simply put is how do we give customers more choice on what they order, how they order, how they pay, technology helps some of that. we have 120 kruns around the world. not everything has to start in the u.s. and sometimes you can use smaller markets that are more agile and you can learn quickly so we decided to roll out this experience in the future right across the market 4 or 500 restaurant market and the learnings you can transfer quickly so as we start to develop that here in the u.s. we have a head start.
we know what works we know what doesn't work and we can come out stronger and faster. >> you talked about if 10% of our customers share their data being able to track them around the world, how far along, this is the early, early days for that. >> we talk about being customer obsessed and we are when customers visit the restaurant put we don't have the one-on-one connectivity which digital technology allows you these days we're bringing in loyalty features and trying to bring more features that are useful to customers to even make their experience friendlier more convenient and more fun and when you do that they share more of their information with you and our ability to be meaningful to customers is so much more enhanced when we understand their habits and their family structures we're just about to launch a new happy meal
we can send monotifications and let them know that the minions happy meal is coming up or something is launching tomorrow. they like to be in the know. customers perceive value out of that so we need to build that very very aggressively. >> we talked to ed yesterday and asked about delivery he said makes a lot of sense but there's a challenge in making sure that the food travels. >> absolutely. no one is more pressure about the quality of the food than we are. we have a couple of restaurants in miami our own quality scores and response to customers was really strong and i think part of our advantage, one operationally we can prepare the food and that get that prepared
really quickly but one of the interesting stats because of our scale is 75% of the population. >> we have lots more to learn and progress but initially response is strong we now have more than 8,000 restaurants around the world on delivery. >> everybody wants to do mobile pay and they want to do it big and now starbucks is going to report later this week they're going to do 2 to 3% sales. >> yeah there is i think part is we won the first with this and
we can spend that time integrating the consumer technolo technologying with basically the kitchen so we know that operationally we can deliver those at the same speed and at the same quality it took us a little bit of time to get all of that connectivity working through to the mobile app but we feel pretty confident it will be smooth. >> generationally, why don't they change the whole world and become organic wouldn't you wreck the whole food chain if tomorrow you decide to be organic. >> what we want is great quality and great value. that's fundamentally what we're about. customers do appreciate it for the early stage here in the u.s. customers don't necessarily want to pay more for that.
we appreciate that we're making the effort they appreciate that we're making the effort on their behalf so we will continue on that continuous improvement through the core ingredients great quality at affordable prices. >> that 6.6% number took some people by surprise given how strong it was and on the conference call you believe you're in a position to continue to accelerate your growth. you believe you can get numbers that exceed even that which exceeded even the optimistic forecast. >> if you look over an annual basis a big company like us typically 2 to 3 to 4% would be acceptable we challenge ourselves of how can we get that normal organic
growth and layer on the other platforms of growth on top we think technology and delivery and in the u.s. in particular we still need modernization >> how long is the cycle of growth >> we're already looking at the future pipelines so we don't want the challenge to end. make sure that you don't end up getting into a cyclical thing we have a great period of time and then the pipeline dried up a bit and i have a responsibility to make sure that we keep innovating and challenging ourselves and making sure that the ideas don't dry up. >> where do you think the share is coming from is it eating at home
>> it's a combination of things. we know we're winning share against the nearing competition so that's our confidence that we're getting our base ix right and winning customer hearts and minds. there's an equalization between food at home and food away from home it was actually more affordable and it's beginning to balance out as well. so there's macro elements and it's the nuts and bolts of getting the basics right for us. >> something going on bigger than that steve. when you have the best number in 43 years in britain something is going on some shift it's bigger than just taking share from a wendy's what do you think it is? is it some sort of millennial shift? something is happening bigger than what you talked about.
>> when your a consumer facing business like we are, often we have a body language and we have a confident body language and we're embracing the culture change that we're trying drive-thru the business and they're just giving it a go. customers are recognizing more aggressive, more fun, more inspiring and they'll be continuing to make changes everything is learning from each other. >> mcdonald's around the globe has always been a target, right? an icon of america for those that have problems with america. >> sure. >> is that any more acute now given sentiment about the u.s. around the world
>> there's always been geo political issue around the world. we aim to localize the business in every country that we operate. local management, local owner operators local supply chains. it's the 20% that you localize that indicates to the consumers that we are part of that so we managed our way through and i'm confident we're going to continue. >> just quickly you mentioned something about packaging as a potential change down the world. what is a typical meal going to look like. >> it would be about maintaining the quality of the food. let's say there's an 8 to 10 minute transportation time, innovate around packaging so at
the moment we're placing it in current existing packaging which isn't, is very good for immediate consumption we think that if anyone can innovate it should be us >> does the deliver ticket size need to be larger? >> it already is we're seeing 1.5 to 2 times our ordinary ticket side there's not a minimum order either it's group ordering. families together. groups of friends, offices so by nature it's higher. >> my kids were growing up, the bathrooms were the cleanest. that thing next time was clean but is there a directive did you do something
because i hit one and the bathroom was spotless. i went in italy. the bathroom is spotless did you send a directive >> what we're reminding ourselves is if each of us within the entire mcdonald's businesses focuses on what we should be good at. we look each in in the eye and we get this stuff out. when success comes with it it's a fun time. >> just got a couple of minutes left before we get the bell here got to ask your thoughts about amazon-whole foods. >> okay. >> in what way was it a game changer. >> i think you're seeing a lot of traditional industries are getting disrupted by
and agility. >> you're still doing difficult things you had a lobster sandwich in mcdonald's. >> that's been in maine for a long time. >> a region anonymous product is hard to make people start making mistakes >> if it's going to be the boston region there's 5 or 600 restaurants within that. this isn't just a 20 or 30 restaurant market. these are big businesses in their own right. it does resinate but localizing it is it complicated >> steve, thank you.
>> pleasure. >> we'll see you next times. opening bell here and the s&p at the bottom of your screen at the big board today, focused on the washington d.c. metro area focussing on the spin off and merger with that guys, mcdonald's year to date. >> old dog, new trix it's really incredible you mentioned something about a fly wheel once you start going and 6% this is a huge company we think if they can get 3% growth it's extraordinary.
it seems hard to imagine to that point. >> my friends they say, you know what, this guy gets it whatever it is, he used the word mojo again 232 beats by 14 cents. some of those shorts off their heels. >> this was my plan. i've always said 18 months and they forget and then we had that moro virus incident and of course the picture but this was the quarter where i thought things really started coming together and they have new things on the menu they figured out the labor costs are getting better do i want to say they're back?
>> record highs for all three indices. amd is going to be your leader at the open. >> what a conference call. >> revenue ahead, strong guy graphic chips. >> by the way, the analysts keep trying to get him they say you're mining bitcoin. didn't throw the ceo off a bit that's not what they're saying what are you hearing you're hearing that they have apple. you're hearing that they have the xbox they have the best graphic user and you think to yourself holy cow, what is intel thinking?
you have to promote for her. >> today i learned the ceo was a woman. >> i'm like she has been on every corner for a long time. >> she does not seek any sort of high profile there's so much hot money because of bitcoin that's a small part of our business and what this business is is gaming and don't forget nintendo had a good number and do you know who powers the switch he does not answer to invida unless jim has a snack. forget that.
>> it's another put down. >> shares are up over 4% it's worth coming back to and that's having a positive impact as you might advantage given there's a fairly large stock component but at&t strongly again we talked about it better than expected in terms of the bottom line profit. margins were okay and even though they continue to lose a lot of subscribers at directv they're gaining at direct tv now. came out with a strong performance added 152,000
subscribers. they're telling us we never get those numbers specifically but we do from at&t verizon is up. i'm not sure if it's because of at&t's quarter which you wouldn't expect because that's a market share game. they'll take anything they can get. speculating about a giant deal they'll take it given the performance of that this year. >> look at that. i listened to that call and i was stunned. >> it's a really good call. >> it was great. look, these things and then the laerj face changed how people get content and i think for all that people don't think that they're seeing things they're
going to jam content on this and they're going to find a way to leverage that time warner and you have to think twice before you switch who is going to be dumb and who is going to be dumber? how about smart? >> yesterday was the one year anniversary of verizon with the yahoo! purchase. stocks down by a fifth since that time. we're watching shares of city obvio obviously the restructuring is over and the company is at a reflection point and he talked to jim about a number of top ix including the president. take a listen. >> >> do i have to worry about president trump and your areas of expertise which happen to be areas he seems to be challenging in terms of trade?
>> we talked yesterday that trade is secular and not cyclical really interesting, 2005, 9% of the fortune 500 companies were from the emerging markets. fast forward to last year, 30% of the fortune 500 companies were from the emerging market. that trend is not going to continue when we look at growth rates the whole world sloed but the relationship between the developed and the developing market is very much intact still growing at two times the pace of the developed markets. >> this was an interview yesterday he talking about our company is so dramatically undervalued versus a jp morgan and bank of america and wells fargo and the regulators blessed
about 1.5. he exists. no one has ever seen him. >> yeah. >> i did today i didn't get to talk to him. >> did you talk to his wife? that was cool. >> no, i stayed away from everybody. he said will you stop it three people care about that you david and lisa >> i will talk about scripps networks. >> i know she does. >> i'm a little fond of you too sometimes. >> networks up again this morning. yesterday reported on a battle to buy that company. yesterday reported that people familiar with the situation expect this to settle early next
week sometimes they can get accelerated. the stock up again this on a reuters report saying they were preparing all cash i have report on the fact that the scripps family was looking ascant of the idea of viacom paper being part of the bid. i also talked about the challenges it would present in terms of its balance sheet whether it was willing to lever up to the point it needed to we'll see where this all ends up and whether they would be willing to go to a leverage ratio, let's call it 5 or 5.5 times when you get to $90 a share all cash but the stock has been moving up over the last couple of days it's simply about massive synergies.
controlling 40% of the women out there in general you would need to own their offering and even some international opportunities that are presented. of course discovery very much focused. it's re knew has already come from there but scripps has a polish business. so there's those that argue this is not about desperation certainly not from discoveries point of view but creating something that creates these super fan mini networks. that's what they all are hgtv and you go through the names on the discovery and sc rirks ipps side. >> they have very dedicated bases of people that watch them and who would pay for an over the top platform that incorporated all of those networks.
>> and women, 40%. and women control the purse strings in a lot of houses. >> they do. >> that does have more appeal. i know that they have good numbers. >> yeah. >> they do have good numbers. >> but at the same time there is a threat of skinny bundles and whether or not they have near the muscle to be able to penetrate on those and that continues to be a concern. >> nearly all of sit boeing. >> and the advance decline line not as strong as yesterday but still record highs and all the things that are the market leaders are up today
they had rather amazing commentary this morning. the key to focus on is the revenue growth this is a big company here revenues up 19% and the guidance for the third quarter up 23% that's a remarkable number the charts went nowhere. business expanded and they got into new areas about 2014 or 2015 and the last he three years the revenue growth has been amazing and you see the stock growth responding to the overall revenue growth take a look. to 20 15 they started turning around and it's been consistent 10 or 15% every single year since then and now you're talking about 23% year over year that's even better than people expected so that's why you get these amazing moves up
bottom line look at the 10% up demand is stable about 80% of their revenues look at the price increases second quarter last year $6 $642 a 15% increase in prices they don't have to sell as much in the united states this is all about the big increase being discussed at the trump administration impressive numbers being put up overall. >> let's talk about an anniversary here we talk about etf all the time at cnbc. today is the 15th anniversary of the very first bond etf it's
about 1,000 bond etf's worldwide. that's small compared to stock etf but it's growing fast. people complained about the growth of etf but there's a fairly small part of the overall business so etf as a percentage of the stock market only 8% so there's a lot of room to potentially grow here. we'll have the head on power lunch. there's the four that were the originals. >> let's get to rick at the bond pitts in the chicago good morning to you rick. >> good morning, carl and happy fed day everybody. you know if you look at it we clearly jumped a bit
we're up about 20 basis points and maybe a more important designation. that's when we made the close of the year around 2:12 bunds drifted a little bit but maybe the real thing to pay the most attention to can be seen rather clearly on this year to date chart of bunds. just look at that 50 line. 50 basis points and then the recent activity on the right hand side. we're currently trading in a crown over 50. which means if you start to get back under 50, that crown will turn into more of a top formation right now holding that area makes many traders think that there's a post player nlt that we could see higher yields. now i know that the president loves low interest rates so maybe this chart is just for donald trump, the president. it's the shots it's a two year, two year in europe and basically you're looking at a five year chart
they have been flirting with negative yields for five years doesn't mean that all of those years were spent in negative territory but really that's one they went off the road and on to the shoulder you could love low rates but this is not a low rate you want to love. how do we know let's see how they get those normalized overtime if ever. it's going to take awhile. minus 66 basis points. negative who is going to be buying these? if the ecb doesn't hold that market up or clear the path for others to buy because they will ultimately buy from them, i just don't see it and finally, since the last fed meeting here's the euro verses the dollar, we know rates went up 20 basis points. our dollar index didn't but the euro certainly did back to you. >> all right rick, thank you very much. rick when we come back more on today's record highs across the board. dow is up 108. we're back in a minute
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when they report in august is going to be able to get that at 110 if hah stock stays there >> talked about a number of months ago and continue to speak about but it won't become a pertinent issue. >> why should that be 15. >> they need 80% to close the tender big holders here might be an issue. >> your points a good one. we would rather this be an independent company. it's simply about the market multiple they believe this company could demand. >> yeah, sky work solutions, these are all valued much more hi
highly. >> the session is between now and facebook. >> we have facebook. i didn't sleep last night because it's ridiculous. >> we'll see you tonight mad money, big show. in the meantime when we come back more on the record highs for the markets. d-day for the fed with an announcement at 2:00 don't go away. hey gary, what are you doing? oh hey john, i'm connecting our brains so we can share our amazing trading knowledge. that's a great idea, but why don't you just go to thinkorswim's chat rooms
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we have news here, quarterly letter, we have access to shows the performance for the second quarter. they were up 4.6% for the year that brought returns to 10.7% also initiated new positions in black rock calling it a misunderstood franchise that's beginning to reflect it's valued like a traditional manager but has room for improvement. the firm also reevaluated a position in alibaba. spoke about that in the letter back with more squawk on the street
>> the like share of that is going to be boeing of course and s&p record high and nasdaq record high and oil up almost 1%. >> the road map for the hour does begin with the big earnings out this morning coca-cola raising it's full year forecast what the ceo told tous expect this year. >> mcdonald's ceo explaining his big sales jump and how he this about the amazon whole foods deal and boeing and ford are among the many companies that reported earnings this morning facebook coming after the bell, we'll dig into the numbers. >> also breaking economic data
out. and that was following 610,000 it was advised to 605 that puts this up about three quarters of 1% and last month was a much stronger number. >> a little disappointing on that number with may being revised down slightly and the expectation was for 619 in june and we got 610 again same as last month i'm looking at prices. that's what fast nates me. we did see the median home price of $310,800. that's below june of 2016 and it follows may which had a record
new home sale price. and the young buyer and obviously there's a price premium for new homes. they have trouble keeping the price lower and cost of land labor and materials that continue to rise supply moved up to a 5.4 month supply and these are contracts signed in june that is people out shopping for homes in june. apparently demand is not quite what was expected. back to you guys. >> thank you very much as we said earlier record highs for it >> facebook coming later on
tonight. keeping her in contention which came as a surprise to me and i think a lot of people that she is in the running to be reappointed fed chairman when her tenure ends next year. she's going to walk a delicate line when it comes to shrinking the balance sheet and doing it slow enough to keep the recovery going and not upset the apple cart in terms of markets and also try to figure out what is going on with inflation which has been low. >> the president made a lot of news yesterday talking about the fed. manufacturing plants out of apple. steel, tariff decision, maybe
could take more time now tweeting yet again about jeff sessions. asking why it didn't replace the acting fbi director. ending that series of tweets and clearly seems to be in the sights of the business. >> it doesn't appear to be hurting the markets at least in the questions that it raises about distractions from the economic agenda.
thought it was interesting to watch the market reaction. the market had a good day yesterday and actually came off the highs at that moment so there's going to have to be more there there when it comes to passing health care and thinking ahead to tax reform which we know the president is focused on he talked about that in the journal article yesterday but before the market prices it in in the meantime, the earnings. >> the earnings keep going and the market seems to sort of being b putting to the side a lot of what shis happening in washington and the president in that wall street journal interview. and we still get to see a real plan from the white house. we got a one pager if you recall a number of months ago after the president promised something and treasury rushed to fulfill that promise. we'll see what the plan really looks like but first it's health care still. we have to see what the -- >> the wheels are in motion for which plan it's a little unclear but they're going to have to
have the vote. >> a lot of amendments may be offered as we know on the floor. >> the attorney general is at the white house for what aids are describing as a routine principles meeting but with that the dow offering close to session highs. still watching the ford and boeing earnings today and joins us from chicago. good morning, phil. >> we have a couple of earnings beat let's start first off with ford. a lot of people are saying why isn't the stock moving higher. a lot of this is tax benefit 56 cents a share versus 43 cents a share. revenue in line with expectations and 37.1 billion for the automotive side of the business that's due to a change in the tax rate what people are really focused on what does the new ceo think about what the company is at and where he wants to take it. here he is during the conference call talking about the second quarter earnings.
>> i do believe we delivered a solid performance. i'm proud of our team with all the change we went through but it needs to be said no one here is satisfied and we all have a lot of work to do in part because of the tax benefit but mainly greater productive and efficiency on the commercial side of the business. 255 to 230 a share the revenue side of the business maybe lighter than expectations but what is getting a lot of attention today is bow as good raising it's full year earnings guidance and that's due to an improvement in that productive
they're driving through greater profitability on the commercial airplane side of the business and that's why we're seeing an improvement not only in operating cash flow but also in the guidance and boeing shares the all time high. look at this guys, almost $230 that is what the price is right now up almost 8% on the day. the boeing conference call by the way starts in about 15 minutes. interesting to see what he had to say on that call about the improved outlook the company is seeing for the remainder of this year raising that guidance by 60 cent ace share for full year earnings expectations guy backs to you. >> i'd like to know the last time we had the 8% move. that is amazing. ken good morning to you. >> good morning. >> a bunch of stories in here. is the stand out the guide itself the earnings guide the influence of 2787-on-cash
flow what's the lead? >> well, the lead is not only the very strong free cash flow in the quarter, 4.5 billion but the company did raise it's free cash flow guidance up substantially so you have got the situation you have got, you know, weaker than expected top line just slightly as i still mentioned but you have the company turning these dollars into cash. 787 is a contributor there the best snefrl quarters the company sur prieds myself and a lot of people on their ability to take cost out and drive more efficiency through the factory. >> part of that has been lay offs having they layed off about 4% of the global work force is that over >> no, probably not. i expect the company to continue to focus on the head count as a key component of the cost structure. as you read about every day
automation is a big part of the story. boeing is setting up a new services business segment taking pieces of the defense and the commercial business and standing that up which will provide more synergy cost savings and opportunity. i expect it to continue. that's been a big part of it. >> how much of this are they stealing from airbus or is this the overall commercial business lifting all boats? >> it ebbs and flows i would argue it's the commercial market and don't forget defense as well but commercial market lifting all boats. airbus maybe a little bit more pressure on the larger planes like the 8380 which they went through a few years ago but ver it's rising tide is lifting all boats now.
it was up 8.3. we can advise that. >> it's been a phenomenal run for the stock. one of the best performing stocks in the dow. a lot of it is reflecting the strong cash flow this quarter and near term outlook. i see more macro risk. i see certainly geopolitical risk and take a bit of a breather rather than putting money to work. >> you mention the new services business, i'm just wondering what that looks like how competitive of a market that is what kind of revenue opportunity that is going to be for investors. >> so boeing is, when they break this out with the results next quarter i estimate it's about an $18 billion business
you know with the company having mentioned 50 billion as his long-term 8 to 10 year target so 2025, based on my estimates organic growth gets you to 28 or 29 billion so you're looking at potentially 20 billion in acquisitions if they aren't going to hit that number if they don't hit 50 billion in revenues i don't think people are going to hold it against the company but it is an incredible marketplace and i worry about the company to drive the margin expansion. it makes strategic sense if you look at boeing relative to other industrial stocks. the market is underpenetrated you could argue. significant opportunity but it is a phenomenally competitive marketplace. >> so pricing you see under pressure overtime >> i do. i mean, you've got pricing under significant pressure now even with airline profitability on new aircraft sales that hasn't changed even though you had it
for several years. they haven't fully figured that out and on the services side it's very competitive. you're competing against independent companies and air lines. captive mro operations or maintenance and services operations boeing has unique assets and attributes but i'm hearing about significant pricing pressure on the services business. especially on the commercial side. >> that's an important angle to watch. ken, thank you very much as we watch these shares up 8% plus today on boeing. >> thank you. >> breaking news on apple supplier scott is at headquaters with that. >> good morning. for months there's been speculation about the plans to as it says significantly expand it's operations in the u.s. and the company has been reportedly considering 7 states for that expansion. it appears now that wisconsin is at least the preliminary winner according to a source with knowledge of an announcement
that president trump is expected to make from the white house later today, 5:00 eastern time this could be a significant jobs generator. there's talk of ultimately some 10,000 jobs and of course they're a key supplier of displays and other parts from apple among others still to be determined is what types of incentives wisconsin will grant to the state to the company that is. presumably that's all worked out. unemployment is near record lows in wisconsin nonetheless they are still apparently willing to do incentives and middle of the road apparently paying off with a source saying that wisconsin in particular, the southeast part of the state between milwaukee
and chicago will be the site of a new facility >> well, scott, the president in the wall street journal interview we have been mentioning this morning mentioned that he believes apple is going to build three manufacturing facilities in the u.s. i think he said fox con known as the main supplier of tiphone do we know what they'll be build something. >> we don't know we don't know if it will exclusively be am or how or if this relates to the presidents comment yesterday apple is not talk about it. foxcon isn't either other than their previous statements. this source with knowledge of the announcement this afternoon with wisconsin as the winner. >> ohio is up there in contention as well
scott thank you. interestingly apple doesn't have any of its own manufacturing plants i think there's one in ireland that's it. >> they are contract manufacturers lead by foxcon that build the iphone and pay the royalties. it's not about am. >> speak of earnings, coca-cola also reporting today beating earnings and expectations this morning. a quarterly profit of 59 cents per share. the company also raised it's full year forecast supported by growth in it's newer products. that was also about the weaker u.s. dollar giving the more favorable outlook for foreign earnings i had a chance to speak with the new ceo. this was his first quarter earlier this morning he talked about the divergence that coke kea la is seeing economically the strength is coming from the developed world.
that was very evidence in the organic revenue numbers. 3% organic revenue nailed what coca-cola was expecting much higher numbers from the developdevelo developed world. there is growth in juice and tea and then as far as the carbonated beverages for every case lost in diet they're making it up tw w two cases of coke zero sugar and they're is one in the united states that's coming. the stock reacted positively to the news in line to a better quarter. it's still a company in transition refranchising. trying to get leaner trying to focus.
coke zero has been around since 2005 coca-cola zero sugar since next month. >> that's what is working for them it's growing and the fact is it proves something very important for coke and it's investors and that is that it can still get growth in the carbonated part of the portfolio without promoting obesity or sugary drinks the only other thing i mentioned is that volumes were flat slightly higher in the u.s. and europe but still struggling in the emerging markets and pepsi had flat volumes as well is it all about transactions and smaller packages and are investors going to be on board. >> watch that name obviously influential on the dow dow is up to 128 when we come back more from our interview this morning with the head of mcdonald's on the companies earnings report. expansion with uber eats
but first a check on the markets. record high roacss the board and the s&p up to 2481 [ crickets chirping ] [ light music playing ] you've wished upon it all year, and now it's finally here. the mercedes-benz summer event is back, with incredible offers on the mercedes-benz you've always longed for.
>> sent sells of the company higher the ceo joined us and talked about the future of mcdonald's and how the amazon whole foods merger is changing the industry. take a listen. our industry will get disrupted by technology and you have a choice so that's why we're doubling down on our commitment because it takes the change role more rapidly. today is the slowest the world is ever going to be moving forward. it's only going to speed up and
you have to drive the pace of change yourself. it's fun to do though. >> he also addressed mcdonald's global franchises amid geo political turmoil and global sentiment toward mcdonald's and american companies in general. >> there's different opinions around the world but there's always been geopolitical issue around the world. we aim to localize the business in every country that we operate. so we have local management, local owner operators, local supply chains we manage our way through and i'm confident that we'll continue.
>> short-term tact car lengicals gets people into the restaurants and then discover all the things they have done on architecture and design and things like that. >> changing the mind set of the franchises was important for a company like mcdonald's because it started with all daybreak fast but people don't really understand some of the other changes going on it is a lot on the franchises of the big restaurant chains. they are dependent on them to keep their stores looking good and feeling good and keep one some of the menu changes and it's one big reason you're seeing such better than expected results. that plus 6% worldwide comp number wasn't quite the stand out. what was it? 4% of the united states. >> those are big numbers and he's take share from immediate competitors. to name them after that latest
justifies it >> did you see sweet dreams were made of cheese. >> i don't know. >> i like cheese >> it's though the good for you though. >> yes is that true. for a guy like me, it's just right there. >> that's how you're looking so good. >> as we head to break let's bring you a share of hershey they did cite a stronger u.s. demand overall benefitting just a bit book is going to report after the bell tonight we'll break down what toxpt eec from the social network second quarter after this
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even if it's chasing squirrels, if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. president trump tweeting out that he would not allow transgender individuals to serve in the u.s. military in any
capacity he said after talking with generals and military experts the military must be focused on winning and not burdened with tremendous medical costs and disruptions. the most senior vatican official ever charged in the catholic church sex scandal leaving court after making his first court appearance he was surrounded by cameras after the hearing which dealt largely with administrative matters. >> hundreds of national security forces marching through gaza city following the installation of new security measures at a holy shrine in jerusalem a senior official vowed worshippers would not return until israel removed cameras installed after taking down metal detectors. polaris is recalling 16,000 recreational vehicles. it recalled model years 2015 through 2017 there's been more than 100 reports of fuel tanks. that's your cnb clrc news updato this hour.
nice to have you back. >> good to see uyou as well. a draw down in gasoline of about a million barrels so this is more in line with what we heard to the api last night that's a move over 1% crude is up more than 10% in the last month or so it's not just on the fact that we're seeing draws like this we're going to cut our exports in the fall. in terms of u.s. production we're still at 9.had million barrel ace day but went down slightly we're hearing they may scale back to keep prices more
balanced they like it around the $50 mark so wait and see. back over to you >> record highs for the dow s&p and nasdaq as this year's busiest week of earnings continues ahead of a big fed decision this afternoon. head global market strategist. welcome to you both. how about oil prices that aren't moving up another 1% after being rallied yesterday. energy now one of the better performing sectors this is what the market is expecting for quite sometime we optimistic that the draws will continue and also the news that we got last night that maybe there will be a pause in cap ex
production needs to go up and that's going to be the case. >> that's still down 12, 12.5% for the year. >> here in lies the opportunity. a lot of our clients are asking the s&p is up as much as it is there's highs everywhere except for energy. >> do you agree with that or are you sticking with the winners? >> we're going to stick with our cyclical picks we like financials but also industrials and consumer disgresh nary going forward. >> sounds like you expect an acceleration in consumer
spending sentiment and spending going to converge in the back half of the year >> yes, we are expecting consumer spending to improve in the second half of the year consumer spending will give the economy more acceleration into next year. >> we're also seeing it rising >> we think there's still to be exercised out of the sentiment numbers some optimism about what congress and the president can do in terms of tax reform. at the earliest the end of this year with further disappointment along the way. that will bring sentiment back down toward a more steady but reliable number.
>> i think the fed is nearly done with rate hikes at least for this year. and they want to run an economy neither too hot or too cold and at a neutral rate. the neutral rate is near zero. you add back inflation it's about 1.5% so speaking of the data to be watching the two things is the housing market and also the auto market as well those are the sectors where we're starting to see a slow down in activity and that's something that bares watching. is this not the perfect environment in which to raise
cash this is a very good environment for the stock market just look at the earnings season that we're having so far you have the fed that's not going to do all that much and a global backdrop that's still very solid so we're not saying take all the gains and go elsewhere but absolutely for clients that want to be more opportunistic there will be opportunities to work how much is coming from currency on the other side >> euro becomes more of a worry at around $1.20. we think for right now the ecb, the european central bank is content to try to talk down that
and keep it lower. you begin to see it are you as calm about the whole fed hiking process as an tistaia >> there's quite a bit of uncertainty around the fed there will be a rate hike in december that seems pretty well settled in consensus but the uncertainty for investors will be what will the fed do in 2018 and the economy will be strong enough if the fed wants to go a little bit higher and investors will probably need time to sort out exactly how many more rate hikes there are to come and that will give the markets a chance to consolidate and bring pe and evaluations down toward the end
of the year. >> one last thing, i heard some market watchers yesterday talk about it, the move in free port, massive moves yesterday not to be taken lightly do you think that was a turning point to some degree >> i think generally speaking we are at a point in the cycle where we are seeing capacity tightening up for a lot of different commodities and that could be true for the medals sector across the board. >> maybe a better sign on china as well. >> that's right. absolutely copper is the ultimate gauge of what china's activity is doing. >> thank you for joining us to talk about all things markets with a trifecta of record highs. julia has been following that closely and joins us now with what we can expect after that bell. >> well, david, facebook has been on a massive run and the
question is whether it will be able to keep up the gains. it's been a primary source in recent quarters. saying last quarter that add revenue growth rate will come down meaningfully over the course of 2018 it plans to spend 50% more this year but analysts are actually bullish that the company will find new growth drivers. from instagram and increased user engagement and down the line the messenger ads and what's app as well into the survey that found a modest increase in overall usage
and more positive satisfaction levels now facebook is projected to grow revenuely 43% of the quarter to $9.2 billion while earnings per share grow 16.5% so another key number we should watch after the earnings hit is average revenue per user analysts project $4.71 now it's worth note giegs that facebook's first earnings report as a public company was five years ago today. the stock has moved 7% either up or down following those earnings back to you. >> talking about the all time low of 1758. that's a long way from 165 thank you julia. julia watching facebook earnings that's going to be a big one along with whole foods tonight
guys >> they have a piece on how in europe they're calling tomorrow the day from hell. earnings from companies worth a total of $3 trillion if you can believe that. >> yeah. the conference call on facebook is always interesting certainly. he looked at the alphabet results. there's a very strong correlation and he does say that the city model predicts 51% boost in ad revenue from last
year and most of the growth. >> they're also funneling back into potential businesses that will fuel their growth into the future it's something to watch. >> when we come back, take a look at shares of at&t the company had a revenue and earnings beat. but next former fed governor will join rick on day two of the fed meeting. dow has a double digit gain for the year nasdaq getting close to a 20% gain for the year.
>> good morning, rick. >> good morning, sarah good morning thanks for joining us this fed day. >> pleasure. >> do you expect any new information to be thrown out by janet yellen and company today whether it's on the interest rate front or balance sheet front or another front. >> no things are quite that's good news inflation is under control she has achieved most of her objectives >> now in order to understand how our fed is going to rye to raise rates, lower balance sheet or a combination there in how important do you think it is to pay particularly close attention to other central banks considering money, capital, what they do or don't do effects what our fed does or doesn't do
how big a deal is that bob japan europe and the united kingdom and the united states. otherwise the balance of payments gets out of order and the financial markets even more so if they feel that the markets or their economy cannot take more normalization but our central bank believes they want to go down that road, how does that all workout? do we make progress or do that impede that progress >> we are clearly on the road to
progress we get closer to normalization >> they're afraid of their own shadow great conference great country, great time. germany is doing well. france is hoping to do much better so europe is going to be strong in the coming year or reasonably strong at least but the central bank are dragging their feet they're afraid of their own shadow and mr. draghi should stop dragging it on. >> let me ask you a bit of a financial personal question: we have the italian ten year at a lower yield. we have the shots. the european two year in the minus 66 camp no i wouldn't but
i'm a stock man buy and hold. >> i don't think you're dissimilar to a lot of investors. most likely much of that. >> paul: soerned by the southern central banks that issued witt the ecb propping it up at a level that's unrealistic in the final half minute we have left do you think negative yields in europe will persist for a long time without being addressed? do they need to be addressed >> clearly they need to be addressed. which investor will give money in order to lose money you are promised a negative return
no reason to ever do a thing like that. >> it's always interesting to hear your comments all i can finish up with is they're buying the euro and they're buying he conveyties not only here but in europe. considering what you said about negative rates is there an intersection out there that everybody is ignoring? i don't know the answer but i have a feeling that we have at some point sarah, back to you and thanks bob. >> we'll ponder that, rick, thank you. let's send it out to john with a look at what's coming up next on squawk alley. >> facebook reports after the bell the stocks up by more than a third. can these results shake off the kind of action we saw in alphabet when it reported? our investors going to like this or block it? we'll see coming up on squawk alley. whoooo.
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record highs this morning across the board for the dow, the nasdaq and the s&p, we are joined by kenny this morning here as we catch yet another day. >> it is another day, but look what we're doing we're hitting our highs on the s&p, hitting our heads on the highs of the s&p there's plenty of resistance here the markets have a big move, certainly the earnings have been great. they are rewarding the spots doing very well for sure, but the broader market now is running a little bit of resistance trying to catch up with itself, honestly. >> we are halfway through the fang earnings, doesn't bring they couldn't bring more >> that's true tonight we'll get more we saw what happened at google, they killed them on the top and bottom line. the revenues for the profit load made everyone panic, but facebook is up 28% year to date, or 44% year to date. so even if they kill it, you may
see them taking some money off the table just because it had a fairly dramatic move >> kenny, whether the trump rally, right after the election it was all about what president trump said, what the chances of the economic agenda are, how do we know whether that will move the market >> you know, look what happens the market has been ignoring most of what is going on in washington they are pricing the fact that we're not going to get reforms they are watching this service take place down in washington for the rest of the year, and they are going to talk and talk and talk and yet the market is not going to reform. that's the fear after earnings season is over i think when the reality of no tax reform, no real health care reform, then you're going to see the market back off a little bit, not crash, just back off a little bit because it will have to reprice based on the fact it is right up to these levels on the expectation of getting the reforms. >> and yet it is not standing in the way. we have the headlines on the russia investigation and on the tip with the attorney general. and it doesn't appear to be standing in the way of the
market marching any higher >> it doesn't, because i feel a lot of people are tiring of the whole russia thing they are just tiring of it whether or not it's -- they believe anymore, it's a lack of credibility, not a lack of credibility, the market is not going to pay attention much from entertainment purposes, but not because of market evaluation especially right now, it is looking at the earnings and going to listen to the guidance going forward. certainly for the most part, it is better than expected. >> do you somehow expect the tax reforms to be built into the market to some extent that there's a premium? >> people are hoping you're going to get it. trump just said. he's moving on tax reform. he's got rates at middle class america. so he's keeping that conversation going i don't think we're getting anything this year at all. i think we have pushed that now to 2018, but i think the market is going to have to come to the realization we're not getting it this year. and that will happen after earning season is over as we move into the fall august and september tend to be
tough markeonths on the market n general, and then we'll reform and the pressure. >> not that we have seen the re-pricing in the sense we haven't gone lower, but certainly it seems to me there's no expectation for tax reform. >> the dollar lost all its gains. >> listen, i agree with you, but on a certain level, because he keeps it alive by saying i'm doing it, i'm doing it, i'm doing it, for the most part, people are assuming it's not going to happen this year. but i think earnings right now are getting in the way that's why the earnings season is when they focus on the macro stuff, whether tax reform, fiscal reform, russia and all the other noise populating in the space. >> i did a poll on twitter with sessions getting fired, would that have any market impact? 56% said no impact, none. >> no impact it's entertainment value for us just watching it but i don't think people really care anymore and i think that jared kushner came out, manafort came out, they are looking at it as entertainment but it's not going
to drive long-term market value. >> kenny, thanks, man, good to see you. >> you're welcome. when we come back, we'll pay attention to the market rally. dow is up 99 stick around for "squawk alley." we'll talk to bob peck about suisse, evaluation and at large in a moment. to keep our community safe. before you do any project big or small, pg&e will come out and mark your gas and electric lines so you don't hit them when you dig. call 811 before you dig, and make sure that you and your neighbors are safe.
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propelled by stocks of at&t. at&t shares are helping to lift the overall vanguard telecom with the ticker vox on pace for the best day since may 5th the telecom sector, however, still the worst performer in the s&p 500 so far this year, down by more than 13% that does it for this hour of "squawk on the street. back downtown to the start of "squawk alley. good morning, it's 10:00 a.m. at mcdonald'soakbrook, ills and "squawk alley" is live ♪ ♪