>> don't pick stocks -- >> what you do is not a second job or something that you can do in your spare time, if are you not somebody who is an expert at this >> i don't think so. it's a fair amount of work do you really want to be reading lawsuits as a hobby? >> although that was pretty good >> jim chanos, make sure you join us tomorrow, "squawk on the street" begins right now [ music playing [ music playing >> good thursz morning futures up, nasdaq will try to break a five-day losing streak tons to tell you about amazon, microsoft, intel, ecb is green, holds steady.

despite backlash, they top expectations no slowdown has been reported. >> chip maker, beating on the top and bottom line. upped its revenue guidance. a week after that fatal midair engine failure, southwest warning of a drop in bookings. gary kelly will join us exclusively this hour. we have a blockbuster lineup three ceos, dr. lisa su and gary kelry of southwest and brian niccol of chipotle steve mollenkopf of qualcomm and hugh johnston from peps soco and lance fritz. >> it will be rock 'n' roll here, jim. >> this is the biggest day you got to talk about earnings

obviously, facebook is coloring technology given they did not say anything negative or surprise in terms of their spend, unlike say alphabet so when you get a quarter like that, it's almost like nothing happened i'm sure people say, wait, i would come back and say, it doesn't have cambridge analytica. if they're bad, they have to telegraph. >> they didn't there were no signs they seen weakness, in fact, they said the opposite the growth was incredible >> during the course of when there was so much ocus, we did point out time and again the incredible growth the company had. there were some questions. the thing so interesting last quarter is they hired so many people, yet they were able to post operating growth of 39% that's operating growth. and then of course have you the top line growth well above that. so operating growth on top >> david, how do we deal -- >> they doubled their work

force. >> the model is incredible he said to the congress, what model? you don't understand the model question the model question is coining money and as the different analysts said, kudlow said the same thing, senator, we run ads. i will say, david, solve this for me, here's a puzzle. dr. lisa su is a brilliant mathematician. she'll solve it the pe for facebook is 18 they're growing. >> growing top line right now. there is no revenue growth deceleration let's call it what, i don't know >> operating kind of growth between 15 and 16% so coca-cola sells at the exact same multiple and it grows 5%. how do we justify this proctor and gamble, pepsi later. it's a growth of 1%. this stock may arguably be, are you ready, ski daddy -- the cheapest stock in the s&p 500. maybe that's why they're buying back 9 billion >> that said, people will do

what 9.50 in 2019. >> 920 >> all right why wouldn't you be higher they seem to be blowing all the time >> yes gdpr >> they did flag gdpr as a risk to mu and a high end on costs as zuckerberg said on the call last night. take a listen. >> we're going through every part of our relationship with people and making sure we're taking a broad enough view of our responsible, not just to build tools, but to make sure those tools are being used for good this means to invest heavily in safety, security and privacy >> so the ongoing skeptics mate sigh this is early, early days >> but let's talk about capital expenditures they were guiding 14 to 15 build. they came in at 15 ruth, alphabet surprises us with

a guy g a. >> mel b: -- a. >> mel b: gapt a gigantic spread they said it's a much better use of money to go with facebook on tv i don't disagree with that. >> i apparently off line, they are monetizing, what's app and instagram is lower than it otherwise could be, so that there are opportunities to increase growth in those areas >> yeah. the stock is, they have neighbors they're not even talking about because they got so many other levers they can talk about it was a beautiful quip. >> back to the multiples, 50 this stock is not going to trade at 25 earnings it's going continued to be capped because of concerns and questions. even though, by the way, remember when they lost users in north america. that's the last quarter.

now they gained a million. >> after momentum. down 700k in the prior quarter >> we done know what happened in march, in april. they could fall dramatically, it would still be cheaper i don't think they did or else they would have said something i think this quarter shows you if this company is beyond belief profitable and, therefore, i believe that risk is government. it's got to be broken up it's too profitable. >> oh my, are you talking microsoft on me? >> that's the argument >> it is >> too power too profitable therefore -- >> they should adopt the alphabet model then. >> i know a company that would fit one of those descriptions will report tonight, perhaps too power. definitely not too profitable as we look ahead to amazon. >> they're allowed to lose as much as they want. they have a hundred million happy people that's farming >> that's 30 times the typical

army >> the facebook print happened as the cto is testifying in front of parliament and the uk >> that got testy, once again. as you said, the risk being government they said it's our favorite large cap stock. >> on a multiple basis they called out europe they said they have users decline. that was the only negative, but in an otherwise, just completely, what i would say, overwhelming call and a reminder of the advertisers on facebook were early in the adoption of the advertisers. to me, i would have told sister instagram story. they didn't do that. they didn't have to, the numbers were that good >> look, what can i tell you there is a big short base there. they thought they'd get negative april. cambridge analytica, they got cambridge harvard. >> stocks still down for the year so >> why don't you just kill the whole story, man >> i'm not killing anything, i'm

pointing out a fact, trying to keep it in the realm of fact >> david you have never let the facts get in the way of a good story opposite that's me. but i will say this, here's the issue with facebook as far as i'm concerned. you are still going to get people who say, if they regulate it as a media company, then i got to tell you something, that multiplicity is right f. they wait, remember dial corps, dial on greyham, if they regulate like greyhound bus, david, wow,b is telling me i got to move on >> we have to make time for these exclusive interviews this morning, when we come back, dr. lisa su will join us from amd post-quarter, stock is up as you see 374% over three years. southwest gary kelly earnings beat, softness in bookings since flight 1380. we will talk about that and a lot more pre market, dow is in danger of its first april loss since '05

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all right. let's have some pure joy i like it. according to beats on the top, i like quarterly beats on the bottom i am so honored.

i am so honored to have dr. lisa su how do you get the margins and typically beat we don't get both. >> we are happy how the quarter went and the quarter started for us it's about the long-term strategy paying off. we're all about high performance products we saw a night ramp across our product lines and c and gaming center product lines so that gave us the top line as well as the bottom line beat >> let's talk about very big wins you are really talking about addressing the exciting market to me that versus data center. i don't know which is better you are betting on both? >> we are. these are large markets, gaming is a great mark. there are lots and lots of gamers from the casual gamers to the real enthusiast gamers we're addressing that entire

segment. but data center, i mean, this is where everyone needs for power in the clouds. they're really great market segments we are a part of. >> you went there in the q & a you talked block chain you didn't talk crypto good growth. it seems you will temper your growth expectationles. this is a market you say is here to stay. >> the way i think about block chain, it's a very important technology the idea you can do the peer-to-peer transaction, decentralize network it's a good technology i think it's been a distraction frankly in the fourth term we want to say, we know how the mark works, they need our products let's not get distracted we have a great story here across a number of different market we want to make sure people focus on the core markets. >> do you think it's temporary in nature? why would it be a distraction and not a more reliable avenue of future growth >> what i would say is people are watching the day-to-day what

bitcoin does, thinking that somehow relates to our day-to-day sales i would say it doesn't, the long-term technology is an important technology we're spending a lot of time with some of the key influencers in this area so i think i'll be there the next three, four, five years what it does tomorrow versus yesterday. i think that's anyone's guess. >> specific e specific to that, something analysts are taking issue with they believe ask an outside contribution from etherium mining, susquehanna, i'm looking at a report from here gp reports from the retail channel they believe are grossly underestimated at the company. they say they are 23% of the first quarter '18 revenue. can you give us guidance on whether that's true or not >> absolutely. we gave guidance that bebelieve block chain or mining was approximately 10% of the revenue on the quarter the truth is, there are a lot of different

factors in these estimates we feel we have a very good idea of what people are using our products for, so, you know, it's a nice growth factor, but it's certainly not the dominant growth factor in our story >> so those who say will you have a etherium-reamed gpu hangover in the second half, what do you say to them? >> i say we have a great set the of products through pcs and data center these are our core markets we believe we will gain mark share in the second half of the year >> why >> the product are very strong, our customers are increasing adoption there is like on adoption rate you go through particularly in the data center, so they are doing proof of concepts for products right now that will go into second half large volume product. we feel good about where the core markets are >> so lisa, this is one, i want the people know the arc here you came in with a very unprofitable company you turned it into profitable. now it's extremely profitable. sow bought back a little bit of

debt is the idea to pay down that debt to have a really great balance heet >> no, we are absolutely on a journey with amd i think we're in the let's calm at this time third or fourth inning of what we're doing i'm very happy with the profitably i think that will expand as our margins expand, yes, we will absolutely improve our balance sheet over time. i think the idea is you need to invest when have you these very, very complex you know technologies we are, you know, investing in a way that we're improving the bottom line but also improving our foundation >> i'm glad you put that question you talked about the investment. you know you are going up against intel. though are you partners this one line you are going up against invidia that has high end gaming graphic am user. how do you fight jensen long and invidia and intel and their balance sheets >> you know the best way to think about it is high performance computing is a $75 billion market

75 billion market. and we have an opportunity to address that entire market so, you know, we actually believe our technology is very competitive. we're partnered with some of the leading foundries, to make sure we have great manufacturing capably and the fact is, there is a need for many different solutions in the market. so our customers are telling us, they like our roadman, they're even more excited about what we have beyond 2018 so i'm very, very you know confident that we have an execution engine that would get there. >> i would think some of this comes down to differenciation in terms of personnel and finding the best people. is it becoming more competitive? are your costs potentially going to rise in terms of finding and paying the best people to keep that market share where it is and grow it? >> there is no question that, in fact, it's about talent and a talent war i would say that we have very, very strong talent it is very competitive, particularly as we get to some of the machine learning and ai

type of market, that we believe our long-term growth markets i think we also offer an opportunity to do something very, very special in the marketplace. so >> the question on capex, because we got durables today, some of the intern ams are not as strong as some expected post-tax reform. so i'm wondering, do you think that's still to come how do you view that >> you know, for us, we really rely a lot on external partners from a manufacturing stand point. so our capex is relatively small, relative to the size of the company. so yeah, i think there is a lot more to come there is there did the expensing benefit view change at all? >> not from the stand point, our primary benefits are design, design eng fearing, product engineering. we really rely on our partnerships on the manufacturing side >> let me talk about wins. you mentioned dem, hp, lenovo. who is new, who is taking more of your product line than intel would? >> yeah. so, we have had a lot of new design wins. i think we've always been

relatively strong on a consumer side, but on a commercial side, adding hp, dem, and lenovo on commercial pcs i think will help our second half of the year as those come out we're very excited about the data center. i think working with the big cloud data centers, microsoft, and bydo have announced their plans to really ramp with our now product server line. we have other data service commerce yet unannounced those will come out later this year >> you mentioned that, too, because there is a you had being consensus that things have peaked in this group, that there has been so much money spent that it's got to pull back that pcs just had this momentary burst, where do we see sick you lar in all those trends? >> no question the graphics in gaming mark and the data center markets, those are secular growth we're seeing it around again all the new specific models around graphics and gaming.

we're seeing it in fine learning, ai those are sick you lar growth and will continue over the next couple years there are some segments flattish pcs have a tendency to be low single digits down, maybe flattish from our stand point those are mark share opportunities for us. we're relatively under represented. >> thank you dr. lisa su thank you for your advice. >> thank you so much when we come back, so much more to come. we talk exclusively with southwest ceo gary kelly and declines following last week's engine failure incident. and chipotle, we talk to brian niccol, hear his game plan for turns things around. comeps better there. stocks from the nyse continues in a moment.

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single digits days of earnings season. reports out. chipotle and southwest, we will get more on both and the opening bell in just about seven minutes. ♪ when i first came to ocean bay, what i saw was despair.

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which allows them to take advantage of growth opportunities in up markets, while maintaining a level of protection in down markets. so they can focus on new things like exotic snacks. talk with your advisor about shield annuities from brighthouse financial- established by metlife. all right. a few minutes before the opening bell this company is bigger than boeing bigger than verizon, bigger than at&t i can go on, it is the highest billion dollar market cap company out there. what is it >> we shouldn't be quiet it's visa. they have double digit gains they did $1.11 consensus was $1.02.

you don't get this beat from a company, revenues go 13% net income gap 5%ch let's just say this david, this also has actual implications for the economy now i know you benefit from higher gasoline prices, we're going to talk to a company that doesn't benefit southwest air. i look at this see dibl double digit growth in payment volume and process transactions >> that is mag in effect paypal is an 80 billion company. david, this is what you want, as credit suisse says the good kind of beat, higher volumes improve genes. expenses totally out of control. >> you say broader economy, i guess in terms of spending >> mastercard will be a huge number, too, payment processing versus banks, thin tack over

thin >> all right it does have over a 100 billion larger cap than citigroup. >> we don't talk about it enough kelly keeping up after mr. sharp did. he went to uk. he is doing great there as well. i congratulate this team for really crushing it, crushing the numbers. that's what we want to see >> last night you tweeted that some of the results we got get people a chance to ring the register are you still in a sell the right mode >> yes, absolutely i think what we get here as we talk to larry kudlow later, have you this push me-pull you mark, many we got all these great number, then we could find ourselves over the weekend slapping tariffs on $100 billion worth of merchandise we will say, why didn't those guys on "squawk on the street" tell us the other side of the trade, which is the mackerel has real issues. the president is more about i think trying to beat the chinese

than he is about trying to get the dow jones industrial average higher so, therefore, yes, when you have beats like these, they take something off the table. >> do you take something off the table, boeing? that's tougher the answer is probably painful union pacific didn't do a number so norfolk southern up $so yes. chipotle up huge don't read that and dominos up huge would i take profits in dominos? i got them on tonight. let's listen chipotle is at the beginning of a move we have some, yes, i am sticking with a notion that more trades have gone up too much. we have fat trais trade hikes. i don't like the situation those interfew >> commodity prices, the strong dollar >> freight freight. freight. by the way freight. >> that's the s&p at the bottom of the screen the opening bell at the big board, management

software company transports will be the ones to watch >> and american airlines, [ inaudible i thought norfolk southern would be the way the story would go. it doesn't look like it. ceridian is back won time the market share. >> really? no kidding >> no, bought it all the way down when it got to 6, i remember i called the ceo, i look, i'm the largest holder of this stake, how'd that happen? holy cow it's back, bigger than ever. >> p s&p will be led by chipotl. >> what a quarter. >> they beat on the top and bottom line. check of five. only traffic down three was the

curiosity here >> a lot of questions were spent on thatened and i think brian no pould away frpulled away from t, told a story abdicateer, what i record as a new ethos in the company. it's interesting, he said the company had completely lost focus and gained a focus without ever losing the -- has produced remarkable leverage. let's not forget, david, as someone that owns bar sam and gym, they have come down big believe it or not the food costs are lower. it had been a continual thing. avocados are on almost every single dish they serve. >> restaurant level margin goes to 19, five from 17, seven, we'll see if they can get back to the low 20s where they were

>> brian miniccol, i will say yu have to see chipotle, we want to talk about when you look at the ingredients of a burrito from where he came from, taco bell, i don't even recognize some of those pre servetives but they have 24 ingredients versus the 8, 8 natural in chipotle i want to know how he will overcome his back graft as being the guy that puts out let's say the moss and chipotle is about a better world >> are they clashing ethos you have to find out. >> guy, at&t is down almost 5% it was not a good quarter. video subscriber trends, particularly directv, they are pointing for support of the growth of directv now. they did at 312,000 subscribers to that over the top service 1.5 million toll subscribers remember the price point is lower than directv and there, well, they're losing a lot of

subscribers. they lost 188,000 directv linear subscribers. you know, the question becomes, well, how many of the new subs being brought on directv now are very low margin. so that's concerning people. the entertainment segment. i think it was up 310 basis point year over year decline in the ebitda margins causing some concern. of course the at&t deal also out there. you can imagine why they're anxious to get it done, to help bolster that overall business model they have there. not even talking about wireless, where, of course, verizon had a good quarter at&t weighed down more by at&t as opposed to overall wireless >> there was a time when the so-called syria wars between general mills and kellogg, what they had was gould gogo. bogo is buy one get one.

david, they're doing buy one, get one. that's a sign of entertainment the directv loss ebitda down 19% on apples-to-apples basis, spending more, getting less. this was the kind of quarter that says they got to merge with someone. >> they are cutting prices in wireless to keep market share as well there was 170 basis point year over year defined in their ebitda mar jens. so again, there is a lot of price competitiveness still in the wireless margin that lets me think, how will you let sprint and t-mo merge that's a story for another day >> you look at facebook, they get 10x. you look at how much atts has spend and you recognize what a lousy industry >> facebook is soaring >> up almost 9% after those

blowout numbers. >> yeah. >> chipotle, amd, facebook, all the gains of 8-to-15% this morning. shares of southwest, though, are under pressure today the carrier did return a mixed earnings since the accident the measure of revenue per seat mile will fall between one and three. joining us this morning, southwest airlines chairman ceo gary kelly is with us. it's good to have you back once again. >> good morning. thanks for having us >> first off, our thoughts are with every family affect the company as you are working through this period. talk about the level after attribution between the incident on 1380 and the bookings you are talking about in the third quarter. >> again, thanks for your comments and obviously our hearts are heavy and we're continuing to put our focus on taking care of our customers and certainly our thoughts and

prayers with jennifer reardon ap her ph and her family you know, so, i think our business is holding up just fine a little bit of softness is to be expected. we pulled all of our marking and promotional techniques last week and they'll be back on this week and planning for a normal quarter in terms ofing booking campaigns and sales and things of that nature so, we'll get back on track here and just again i want to thank everybody who has been so supportive over the last week. >> gary, yeah, this is a tough one. although, of course the pilot, she is a hero. we have to mention that too. your industry is cash rich for the first time, i can never recall, which means everybody is buying planes. what does that mean for a company leak yours that never had a loss and always had a good

balance sheet. is the competition getting tough? >> welling the -- i agree with that, jim, i would also point out that we have never been in a stronger position. so we got very little debt a lot of cash a lot of liquidity we're growing at a very manageable rate. is and we have a lot of fans that love southwest airlines so it's a very competitive environment. we need to continue to evolve our tools and techniques we have already made some changes after our, if results. so we just need to continue to focus on the basics, offer great service, offer a very, very low price and, obviously, keep safety as our very highest priority >> gary, one of the things people have been calling out over and over again this kwarque is a sudden increase in fuel how are you handling the increase in jet fuel prices? >> well, as i'm sure you all noticed, our margins are really

strong, it's even with higher fuel prices, they're among the highest in the industry. we also hedged the hedging effect on the second quarter is pretty newt tram. it's not a negative. it's not really a positive if prices continue to go higher from here, we have very solid protection in place. we are also modernizing our fleet. that was a part of our announcement today, sense december, we've firmed up 80 options for a firm delivery on the max. and the max aircraft is 13 to 14% more fuel efficient. so we'll continue to look for ways to be more fuel efficient continue to look for ways to mitigate the price, sharp price increases with our hedging program. >> gary, can you give us an update on the total count of engines being expected do you think you can put a cap on that by may will that be done? >> it should be done by the end of may, certainly. our target, when we announced

the accelerated inspection schedule last week, was to be done in about 30 days. so as of this morning, we have already inspected over 80% of our fleet, including inspections that we have already under taken dating back to late 2016 so we're on a very accelerated cycle compared to what had previously been done in the industry, which is to look at engines and these fan blades, roughly every 18 months, or every 3,000 cycles so, yeah, i feel very comfortable what we are doing. very proud of our folks. ge, boeing have certainly been supported as have the faa. of course, we're supporting the ntsb in their investigation. the inspections are going well i'm pleased with the results we are seeing so far. >> although the investigation and inspections continue is there any additional color in what might have brought about fatigue on some of these blades? >> not at this point you know, i think that's a part

of the ntsb investigation and they have two investigations that are opening but in the meantime, we'll be doing everything that we can to inspect these blades to make sure that we finds any metal fatigue. it is highly unusual to have fatigue in these blades, so the accelerated schedule that we're using will be more than adequate to identify then early warnings and then we simply replaced the blades and they're discarded >> gary, can you talk about tammy jo schultz and what she means for your airlines, what she means for the country? >> well, she is -- she is a hero and obviously performed mag 95 se 95 sently -- mag 95 snificently

horrible session she thereby first to tell you that that entire flight crew did an amazing job and you know we have several customers who stepped up and were very heroic on that flight. so it was a horrible situation and a very dark time but i think what often happens in these situations as you see real courage emerge, real heroes real compassion. so there has been a lot of light to be very warmed by in all of this and i do want to take the opportunity to thank our competitors. we try to beat each other up every day. but when it comes to a time like this, we all come to each other's aid. but, in particular, american airlines in philadelphia was extraordinarily helpful. so a lot of these things, of course, just touch your soul but tammy jo is a hero and i'll

never forget her >> all the points are taken, all the majors the competitors know what it's like to go through a time of trial so they remember that when it's somebody else's turn good to see you again, thanks very much. >> you can count on it thanks for having us >> southwest airlines in dallas. transports will still struggle today, jim, whether it's a fleet transitions or additions to capacity in this, in southwest case largely about united in sam markets. >> yes, american will buy back 10% of the company, but it doesn't matter the industry is perceived to be in a price war and this is a classing case of what's so hard about this market yesterday, the rails lead. today union pacific reports a pretty good number not good enough. the airlines have been hanging in why? people have been surprised at the profitability. well, we suddenly get surprised

that they're able to, let's say, have so much competition and the jet fume, they hed fuel, they h better we have one day good, one day bad. that's the president tern. it's unnerveing for people trying to change >> facebook is helping fang today. >> fang is so back it's scary. >> we'll get to chipotle in a missouri one of the new players in the earnings, we will talk to brian niccol we are back in a moment. ♪

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the best trip. so i'm more than confident. forgot me goggles. kayak. search one and done. shares of chipotle surging this morning, up more than 15% after a strong earnings report they promise more change joining us from denver for a cnbc exclusive is ceo brian niccol aaround our kate rogers

take it away. >> thank you so much >> freight to be here. >> congratulations on a strong quarter. >> thank you, it's a great start. >> the stock is rallying that said, you had food borne illnesses, slowing traffic, menu items that maybe didn't fare as well as the company hoped. as ceo, new role for you, what is job number one? >> job number one is to remind the way people stand for it's the food that people want to eat it's cravable. everybody that when the announcement came out, bryant, i love that brand. i love that food i'm so excited to see you be a part of that company i think job number one is reminding people what makes chipotle different and why they love it. >> you, of course, are known as an innovator many are excited with your appointment with what you did with that ka bell, a clothing

line, introducing breakfast. you started a marketing campaign here at chipotle can you telegraph the menu have you called up your friends at dorto's -- dorito's >> there is tremendous things for this company the brand has a strong positioning. and what that sets us up for is to be an innovator in digital and mobile ordering. frankly an innovator in access as you think apt catering, off prem es, delivery. huge innovation opportunities there and frankly across our menu the one thing you will see us do, though, we need to focus on leveraging the platform we are the capability of people to get their food and move down this line is amazing the food is krabable i think there is opportunities to use what we have and present

it in new forms, new variety to get people re-engaged with what they love about chipotle. >> you will focusing on these items you have on hand >> there is opportunity to bring if new flavors as well one thing that's great is we got carnitas and chicken that people absolutely crave i think there is ways for us to present them in formats that you would expect chipotle to offer that currently we don't. >> i do know jim cramer has questions for you back if new york >> sure. >> first, brian, congratulations on the job i think your work is already showing some success i need to ask you a question when i interviewed a chipotle firm for many years for "mad money," one of the themes underlying the company is they're natural and they have so many different ingredients in there, kind of let's say

preservatives. how do you deal with the cultural change? one company live mas killle it n -- killing it. i think chipotle would you're from and where you are? >> what i'm excited about is where i am because i think chipotle presents the food that people crave in the future and how they us will want to eat in the future i think it's important for us to keep the brand relevant. leading culture so we're talking about the things that interest people and the thing that's great about chipotle is when people share a burrito here or share a bowl, they are smiling, having a great time, engaged with the food. i have buddies of mine constantly saying i'm going there almost every day so i think there's huge opportunities for us to just celebrate what is great about chipotle and get us in front of culture. make the brand very visible.

get people excited about what they can experience when they come to chipotle >> you start your call by saying we have to increase our brand relevance. i thought chipotle was relevant. the cfo says we have to install a cultural of accountability in the field. i always thought you had could blt. what was i missing >> i think you're right in the sense that the brand and the company has had a very powerful purpose. i just want to make it more visible. over the last couple years, the brand has become invisible on a powerful purpose that means a lot to people that work in the restaurants. as well as the people that come into these restaurants and i think we have been way too quiet on what the purpose is of bringing great food, food with integrity that's cravable, to people and i think we need to continue to really get very proud of that fact and be more visible then on theture of accountability, there's an opportunity for us to be more

cognizant of the financial commitments that we make as well as the innovation commitments that we make and final ly executing a guest experience we need to be accountable to giving every customer the experience they want and expect from chipotle. that's what we're after. >> i have a question for you here 10% of the company, he's not shy when he wants change in a company. have you spoken with him since you took on the new role and can you tell us if he's right, he mentioned you might move into breakfast, dessert, drive-thrus? >> actually i just recently had a great opportunity to sit down with bill who i i spent over an hour talking about chipotle. one of the things we're aligned on is chipotle has a ton of opportunity for growth as it relates to getting more people into the restaurant, driving transactions and building more restaurants, expanding our margins. the thing that i'm excited about is he sees the same opportunity i see, which is if you have a

brand that people love, you have a food proposition that people say is cravable and then we're uniquable positioned with how we approach those ingredients and how we prepare it fresh every day. so that's where we spend our time he brought up some of his ideas he has on growth for chipotle. the thing we agreed on is there's a lot of opportunities we're going to be choiceful on what we kmoochoose to move on f. breakfast is not in the cards in the near term because there's a lot of other things we could be doing to grow this business, but not to say that's not an opportunity longer term. >> never say never on the breakfast burrito. thank you so much for your time. >> thank you >> back over to you in new york. >> i've got to tell you. i think brian has the place really energized one of the things that has happened is that as et he said, there really were a lot of things that needed to get better he was not critical of the

previous rejooem but i come back and say, wow, some of this was self-inflicted. i just hope that you can have food with integrity and blow out the numbers. >> back above 400. near 19% gain back to last july. you said 18 months >> that's what it took >> not far off >> exact ly what it took. >> when we come back, the exclusive with steve mollenkopf and a lot more the dow is up 64 points being led by voisa. we're back in a moment ♪

whether it's a big thing, small thing, or something unexpected, pnc will be right there when you need us. because when it comes to your finances, if you focus on today, tomorrow has a way of working itself out.

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visit att.com welcome back to "squawk on the street." jim cramer is sticking around a little longer. we're about to talk to the director of the national economic council in a few moments. before we get to that, the.edu is up 126. pretty good day. we'll talk about that as well. in a bit >> a big hour ahead. president trump's tough economic advisers larry kud low is is talking

about his meeting with tim cook and much more. plus it's the busiest day of earnings season. we'll speak to the ceo of kwaul come >> company beats expectations and an increase in users a jump in revenue all overshadowing the fallout of the data scandal here's what mark zuckerberg said about the business model >> i know a lot of people have had questions about the business model and this is something that i think we at facebook are proud of and et we think it's the right way to build a service that connects everyone around the world. >> so ad revenue up 43 a dollar basis competed by $45 million. >> i finished the call and said this company is irresistible to users. its users are still the greatest

source of content and paid nothing. and i'm not saying it was nothing, but i am saying that the press made more of it than the people >> to analyze the stock, you have to do the theory of congress and what we're going to see. deutsche bank said facebook is not out of the woods we could see lawsuits and headline rusk and that sort of thing. but they did say the worst case fears declined meaningfully after the conference call. >> they also added they would have told us otherwise they are seeing no meaningful deterioration in users or advertising. since the scandal became full fledged it was last quarter when we looked at the decline in users and some were in north america and some were wondering whether that would continue. that was not part of a trend up a million for the current quarter pop reversing that

completely >> it's where the viewers are. they haven't exploited local yet. one of the things that i know you have covered the consumer package, the consumer companies know that they have to be in facebook you could argue. it's a better bang for the buck than tv, radio, magazines and newspapers >> it's on the top of their list we saw that daily active user. people look at this to see whether et engagement is falling. ad pricing is is up 39%. so clearly these consumer companies aren't going anywhere when it comes to facebook. it's at the top of their list. you name it. >> we did get another upgrade of twitter in the related space snapchat today unveiling some new spectacles how much of the halo is in effect >> i think that company has been a spectacle when it comes to spending

i still think that they are not the place that these advertisers want to be the they are the place the kids do want to be, but it's not wholesome enough they don't have a cambridge problem. they have a problem where the advertisers say i'm not get itig what i'd like from them. i think this was a quarter there were too many people who didn't realize how good the advertisers were for twitter video. and i think they are coming to their senses today that's what they are recognizing. >> when facebook gives an indication that the ad load for instagram is still lower than it might otherwise be, should that not be viewed as a positive as well for snap or is is that a bad thing? >> i think snap can can trade up obviously, when you talk to these companies, they are not saying i'm advertising a lot with facebook. they are saying we're advertising a lot with every single social media company. i find that snap has to spend a lot of money and is not necessarily the place of choice. but twitter has come on very strong in terms of the consumer

product. >> the president says he thinks there's a good chance of making a trade deal with china and is sending a delegation to beijing for talks next week. traveling will be the trad adviser and drerktd of the national economic council larry kudlow, who joins us from the white house this morning >> good morning, thank you >> are you going to china? what do you want to come home with >> i am going to china hard to know about coming home, but these are serious negotiations the president has asked us to go over there, as you know. we have a lot of disputes with china. unfair trading practices, illegal trading practices, technology related issues and theft. they have barriers and tariffs we'd like to have some market openings better to have a talk one-on-one

discussion i have high hopes for this i'm always the optimist about this president trump, pressed some optimism at the press conference with president macron. so we'll see it's going to cover a broad area all of the disputes will be discussed. >> will there be a read out upon your return and how much, if anything, did tim cook add to that conversation in the meeting yesterday? >> i don't know what you maean y the read out we'll try to brief when we get back and tell them what we can tim cook was most helpful. i spent a good amount of time with him and i came back and we visited president obama tus. he has a lot of experience in china. he was very helpful in making some suggestions and i might also add he loves the tax cut and tax reform he says it's great for business. and apple is going to be building plants, campuses, adding jobs, lots of business

investment that was the first point he made i enjoyed meeting him. it was a great pleasure. >> first time on air i may have been able to congratulate how. great to see you be there. >> thank you >> i appreciate it >> now we have a key deadline of may 1st. the ceo was on mad money recently he's saying you would be disappointed if the president doesn't fulfill his commitment about steel and aluminum around the globe. but more than that, be difficult to do particularly given the fact that we just had macron here. we have eu concerns. is is the president going to -- where is he going may 1st? >> thank you right now, all that is under discussion you're referring to the 232 national security tariffs.

there were exclusions as you know i don't want to leave anybody out. but it's all under consideration. we will know in a few days how this thing -- part of this is a negotiation. it's very important that some of our friends made some concessions with respect to trading practices, tariffs and taxes. for example, one of the issues cropping up is the equal treatment of automobiles we'd like to see some concessions from europe. the president has said that with his recent visit with president macron so we are locking at everything. i believe the deadline is monday at midnight or some sufficient thing. we'll let you know as soon as we figure it all out. >> i work with you for a long time you taught me a great number of

things you taught me how to be a globalist. you taught me that free trade produces wealth for everyone the man you work for is a nationalist and not a free trader how is is it meshing between your views of free trade and the president's view that the chinese have been waging war and we have never fought back until now. >> a couple things i don't like to segment quite as starkly as you just did. i guess globalist is a dirty word i'm for trading around the world to promote economic growth there are some of these so-called globalist institutions that i could do without. that's my personal view. you have heard me on this subject before but i do believe the world's prosperity would benefit by free and open trading system. but here's the key point the president and i are on full agreement with that. let's take china

the reason we're going over to negotiate is is china has not played by the rules in many years. again, the theft of intellectual property, the forced transfer of technology, a wide number of tariffs and non-tariff barriers, this has gone on for a couple decades. the problem here is not president trump. he's the solution. china is the problem president trump has said enough is enough. he's the first president in decades to track this down really rerebt lentlessly help the americas. it you do this right, everyone will benefit if we can settle these issues and open the trading system but so far we have not had satisfactory responses from china. that's why we're going over there. but it's just not as clear that world doesn't really exist.

this is about specifics. you're a detail guy. you go company by company we have to go country by country and make sure that there's free trade down the road. but in the meantime, the path to free trade is to end these unfair and illegal trading practices and barriers and i think that's exactly the right way to go. and i get it i give the president a lot of credit no one has wanted to do this before >> fair enough thank you. i'm going to pass it over to sa sara >> you mentioned the tax benefit. want ed to ask you about data w got today. durable goods, always a good proxy where businesses are spending they were unchanged in transportation if you look at orders for machinery, they sank 1.7%. what happened to the idea that companies were going o to take all their savings from lower taxes and invest it in their business

s and hire and buy more machinery and equipment and boost the economy that way we're not et seeing it yet >> yes, you are. you just can't focus on one month's data let's go to factory orders the year on year trends are positive i glanced at it this morning i think it's up 8% that's for orders and for shipments. if you look in the ism reports, both manufacturing and services, you see a very strong movement in cap x and related business investment spending. it you look at the gtdp reports, they show the same pickup. so i disagree with the interpretation of the data i'd like to take a broader view. tim cook laid it out for the president how much apple is expanding. and how many other companies he knows that are expanding so if you want to focus on one little number, that's up to you. i disagree with the analysis

>> i'm also just wondering -- that's fair and that's your job. >> nothing changes >> if there's any impact though of the steel and aluminum tariffs on the manufacturing sector we're starting to see rising input costs. it's something we heard from caterpillar and pepsico and uncertainty about broader tar f tariffs and whether that's weighing on business investment decisions. >> there's been some upward price movement in those commodities. we'll have to see how that goes. i don't see any spreading negative consequences, but i'm alert to it. we're all looking at that sort of thing mind you this program to try to get us a level playing field, whether it's china or europe or wherever, but especially china, this program over time hopefully will be negotiated out

the point is you heard me say this before. if it's not, the united states and president trump will take action and those actions will include targeted tariffs i think that's the correct thing. tariffs are not my favorite tool, but i think they are a necessary tool as we move towards fair and freer trade one other point here i don't want to look at this from the dark side i think if we can improve the world's trading system, which is badly it performs, china and elsewhere, this is going to be great for economic growth. here in the u.s., there in the other countries and around the world. my view is china's behavior, which has not been good in key areas, is actually holding back the world economy it's holding back the chinese economy. any time you have market openings, any time you have investment openings, any time

you have rule of law with respect to technology and el elsewhere, those are good things those are all pro growth things. i'm a growth guy so what i'm saying is we're creating a process we're in the middle of a process whether it's the national security 232 or the trade restrictions on 301. that process may work. so far it's only the 232 tariffs that have been put into place and we're going to look at those again early next week et the rest are just suggestions. we're going to negotiate those associations so i remain optimistic we can do something very positive. >> larry, it's david on that subject particularly to china. clearly with the recognizing the negotiations are fluid, nonetheless, you have to go in with what is a clearly defined notion of what would koconstitue

victory. what would be victorious agreement with the chinese >> i don't want to be too definitive because we haven't started the negotiations but there's no question that the u.s. government. has got to see some progress and improvement by china on some of these key issues the technology issues, the tariff and non-tariff barrier issues they have to play by the rules i don't want to be specific b. and by the way, president xi a couple weeks bush administration back made a conciliatory speech. president trump embraced that in a tweet. here we are going to china to try to negotiate but to make this thing work and to be taken seriously, there has to be some important specific signs on key issues whether it's technology or tariffs.

he coined the phrase trust but verify so i think that's the spirit it's a positive spirit we're going there. you have to be tough we're representing american interests here >> larry, we hope you'll come back and give us an update on the other side safe travels larry kudlow at the white house today. what's coming up tonight >> we'll get dominos it's one of the stocks that this is patty doyle's swan song retiring at a young age. by the way, you want the to look young and feel young, you got to admit. top of game. really fabulous that he came on. and thank you for letting me stay >> i'll see you on the stock draft. my first stock draft i'll be judge iing that thing see if mr. wonderful stays wonderful. >> he has the third pick, not

the first. >> self-involved >> we'll see you then. >> when we come back here, the cfo of pepco plus an interview with the ceo of kwaul comp. talking earnings, china and a lot more huge stow shoe still ahead i am an independent financial advisor. for our firm, it's all about trust and transparency.

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kwaul kom beating estimates. this due to the ongoing dispute with apple their ceo is nice enough to join us >> good to see you >> we had the national economic adviser talking about china. on the conference call you said right now it's a difficult from a geopolitical point of view judge iing where things are goig to go, not to put words in your mouth. you also went on to say you expected to receive approval for the deal why? >> i think a couple things one, i think there are real talks going on between washington and beijing i think he confirmed that. that's consistent with my view as well. i would say also if you look, we have had eight of nine

jurisdictions rule the remaining one is china it would be an ub usual situation for the rest of the world to approve something and new york china not do it. it's not a great environment for deals to get done, but in 90 days, it can be very different i would remind people the importance of the technology that we work on, not only to qualcomm and shareholders, but the market as well it's a good situation to get this deal done i have confidence that will happen if it doesn't happen, we have other levers we can drive value as well. >> we're going to talk about that do you think the u.s. government's action also impacted your ability to get this it deal done previous to the last dead line >> i would say that's probably more related to just an evidence of a lot of discussion going on between the two countries. >> discussion is a nice way to put it it's also been a growing series

of threats to a certain extent, which doesn't help when trying to get a deal done >> but i think it's also consistent with real discussions going on and real discussions often times lead to settlements and lead to a conclusion of hostilities. i think that's like ly to be the case here. we don't know when, but we're prepared either way. >> 90 days is what you got the clock has started once again. do you worry that it won't be long enough that you simply won't have enough time for those discussions to get where they need to so the chinese feel comfortable? >> everybody would love to have more time. we decided alongside our colleagues that we're going to give this 90 days. if it works we're committed both companies are committed to the deal but if it doesn't work, we have to move on and drive our businesses and that's what's set up in the agreements >> that's a $1.50 a share from

this deal. but you have said that if it doesn't get done in 90 days, you go to plan b >> that's what we have communicated we talked about that yesterday on the call. and particularly at these prices, we think there's a good return very little execution to do something like that. our preference is to close the deal >> $20 to $30 billion is is what your cfo said you'd buy back is that right? >> yep >> why is that a proper number >> we have made some commitments to $1.50 of additional earnings in fiscal year' 19 that's about what it would take to get that done >> are you getting any sort of dialogue with the chinese right now in terms of if there's anything you need to do or if you are hostage to the larger issues going on between these two countries. >> i think it's really the latter we feel like we have a good active dialogue. but i think the environment

needs to move in a better position >> let's move on to other disputes. apple. it's been quite some time since the suppliers of apple have paid you for your licenses that they have with you. you're going to go to trial at some point when is that going to be >> it's quite near if you look we have talked about how the legal milestones that we have laid out, and if you look at our perspective of how this dispute has transpired, it's kind of unfolded the way that we have described we didn't initiate it. we prefer it didn't occur, but really the legal milestones start to happen here midsummer and through the end of the year. there will be a decision one way or the other either through the courts or the way everybody would prefer in a settlement here before the end of the year if we're lucky >> i'd refer our viewers to previous interviews.

we'll make them available online tim cook is going to be deposed, i think, in june some time does that become some area you think gives you leverage in terms of a settlement? >> i think in all cases, peoplen don't like to have legal risk hanging over their head. as you get closer to the legal milestones, the perspective of both companies is such that i think the environment gets better to get a settlement whether that occurs in this case, we don't know. we have active dialogue with apple. >> what's that like? what's that active dialogue telling you? >> it's consistent with our view of our optimism that we'll be able to get this done and delivered in fiscal year '19 there's too many reasons for this to get settled. the real forcing functions here are in the near term >> i would have thought deemed the national champion by the u.s. government that would have been all they needed >> i think the reason the

significance of that is really a discussion of how important the technologies that we develop and invent are not only through the united states but worldwide. so we lock at that and say, wow, we are working on technology that's important on the other side, we also say this is valuable technology. we need to deliver to our shareholders that's what the debate is about. >> you didn't dispute my use of the word national champion do you view qualcomm that way? >> i us would say i view it as a description of how important the technologies that we work on are. not only to countries, but to economies. we have bye-bye lucky to put ourselves in a position where we're the best in the world at inventing these technologies the relevancy of these technologies to more industries, automotive, internet of things, ai as it moves towards the edge, people want to make sure that's going to happen. they are industries that are yet

to be invented they are based on that technology happening i'm sure the u.s. wanted to make sure they are going to be a plart there. >> you mentioned the growth opportunities. something you haven't been able to talk about i could go on and on you're still comfortable with the $5.25 in notary public-gap eps? >> absolutely. >> why are you confident >> a couple reasons. you look at the two quarters we reported since we came out with those targets, which is in january. we had a good quarter in january and just reported where et we bised it by cents. and so we're comfort wbl those estimates. we're working through the plan and delivering on the plan we committed to >> 1..

7 billion of phones shipped is your target for last year. and this year it's 1.8 billion you said on the call there's a lengthening replacement rate we have been seeing it in other businesses related to wireless is that going to continue in terms of people holding on to phones longer? >> we have seen that it's consistent with all the data points you get in there it's also consistent with our model. you have also seen strebt in asps more expensive phones are being sold over time that's happening even at a time where a lot of the growth is happening in emerging markets. and right on the heels where almost on the cusp of 5g happening. that has a benefit not only from the part spective of asps, but replacement rate we don't see anything inconsistent with the long-term model. >> the deal with samsung, i think you're capped at $400 in terms of where you're going to take the percentage on the phones >> that's correct.

that's something that we actually rolled out a little while back we wanted to make sure people understood that. >> i would think that apple some of their argument has been about that very issue. does it gauge them to say we take the samsung deal. >> if you lock at our perspective on the licensing business, number one, we think it's in a stable position in large part built on the success that we have in china and have had for a couple years we're extending that successful framework, which has 150 new licenses signed since we established it two years ago we're extending that to 5g and increase iing the transparency associated with that program one of the reasons we brought that $400 cap up there so people understand what it is and what it isn't and we're rolling it out and e preparing the industry for 5g and we think that's going to include our disputed license sees as well >> what do you tell long suffering shareholders who

watched the stock decline and saw a $79 bid go away. who have seen you battle and decide not to split the company. then you have to engage with the nxp deal, not to mention the s disputes with apple. what do you tell them in terms of you got to stay with us >> i think we're focused very much on the things we hope they think we want to do. we're focused on closing nxp we're going to have another way to drive value we're focused on resolving the license see disputes and the resolution that we have been talking about are very close to us they are going to. happen this year we're also focused on our cost structure and getting the company more focused and in a nimble position to get the right structure for the industries we play in. we talked a bt a billion dollars of loss. and the last one in the middle of all of this turmoil and things the management team has had had to deal with, our po

portfolio is is as strong as it's ever been we're doing the four things we need to do to make the stock rebound. we're also disappoint ed in wher it is, but et we just reported a strong quarter in the core business and look forward to continuing to execute >> we look forward to continuing this conversation. thank you for taking the time. send it back to you. >> thank you very much dow is is up 161 a nice trend this morning. companies that have beaten on the top or bottom line holding their gains. visa is leading dow, but facebook up almost 9 chipotle is the best day, one of the few best days since its ipo. >> a little bit of a short squeeze there. heard from the ceo talk about reenergizing the business and the message.

groups right now and that's a story of facebook and also amd just recently talked to the ceo. that's up double digits. it reported a better outlook and able to rally throughout the day. >> the first few days of earnings season as well. they are still down. >> 33 past the hour. let's get a news update. >> ronny jackson has withdrawn for nominee of veterans affairs. he announced the move in a written statement in morning saying the attacks on his character and integrity are baseless ministers tr more than 70 countries meeting to find a way to colt bat the financing of isis the conference was launched by french president macron to coordinate efforts to reduce the

terror threat in the long-term here at home bill cosby arriving for day two of jury dlirkss. they are revisiting the testimony that a star witness who said their accuser once spoke of framing a rom innocent person to score a big payday and prince harry has asked his older brother to be his best man at his wedding next month. the palace says william is honored to be asked. your up to date. i cannot wait to see this wedding. >> i know. the whole world is waiting can't wait to see the hats when we come back, pepsico reporting this morning hugh johnson joins us to discuss. plus the ceo of union pacific on earnings the stock is under pressure.

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joining us is hugh johnston, welcome back >> thank you and good morning. >> good morning. i mentioned the beat better overall performance, but the north american beverage business continues to be challenged it's a tale of two different companies. tell us about what you found >> so a couple things on that front. as you say, the balance of pepsico is performing quite well right now. international business is up about high single digits actually developing in the

emerging markets and profitability is up double digits froee toe lay continuing to chu along. north american an improvement, but some challenges remain we have seen improvements in the gatorade business and mountain due. pepsi, we have upped our advertising and the business has started to respond but you'll see us advertise more as we continue to improve the perform pants and the balance of the year >> i wanted to dig into that coke kca-cola had a terrific quarter. 5% revenue growth. is this a new front in the cola wars where they have started to take share? >> well, you have seen them increase their advertising it's had some implications for our market share in the last couple quarters. if you look at our broader beverage business right now, as we have invested in future facing categories such as tea, the coffee business. sparkling water business, those are all performing well. gatorade went through a

downturn, but it's now come back mountain dew has come back nicely we're down to getting the pepsi business back on track we ramped up our advertising in the first quarter. we were up double digits as you see us increase advertising further, you'll see the market share performance improve as well. >> what about diet we also saw diet coke grow is that an area there can be a resurgence as well >> i do. if you lock at our broader portfolio, we have pepsi zero sugar and diet pepsi zero sugar is performing well, but it's the smaller business. the diet pepsi business will respond in line with the regular pepsi business as you see advertising take effect into the marketplace. now advertising doesn't have an immediate impact there's a building effect over a couple quarters.

that's what i expect to see. >> we did see some evidence of rising cost inflation. are you seeing that and is that going to get worse >> i think it will actually be pretty steady for us the tariff implications are unpredictable on aluminum. but broadly our commodities are expected to go up. it's a bit higher than we expected in the beginning of the year but not meaningfully so that it's disruptive to our overall profitability performance. >> you mentioned the tariff impact russia continues to be strong. you saw double digit growth. but what do you see into the future we saw new sanctions we have these rising trade tensions can your international business continue to deliver this kind of growth >> yeah, it's a great question certainly geopolitics are

difficult to predict that said we saw double digits across all of our developing and emerging markets and even russia was up mid-single digits. it's one of our big. est businesses so short of some dramatic dislocation, i think what you have is a strengthening consumer environment and strengthening economy across most of those i think we'll see strong performance from them. >> he wanted to ask about the stock price. underperforming this year. the entire group has been pretty abysmal. how do you read this is it the rise making dividend payers less attractive or is there a real growth problem? >> i think it's driven by the yield trade that you mentioned as the it got closer to 3%, you can see staples as a group underperforming quite a bit. if you look at pepsico broadly over the past year, we're basically in klein with the

staples group. staples was in favor and extremely low interest rate environment. now as interest rates began to rise, you're seeing money flow out of equities. i think back into. the bond arena >> always good to talk to you. the vice chairman and cfo of pepsico. when we come back, union pacific out with record earnings stock under pressure along with a lot of the transports today. 'lta tthceo of the large earth north american railroad the dow is up 190.

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amazon, what to watch out for in that one. that's on trading nation more kwa"squawk on the street" coming right up.

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record earnings this morning the largest railroad post a beat on earnings and sales. the stock was down a little over 2.5% we're joined now by union pacific ceo, nice to see you >> good morning and thank you. >> sounds like some of the concerns centered around margin, those rising input and commodity prices, which i would think would help your business drive higher prices, with us on the other, hurts that margin is that what you're hearing? >> so splitting it into a couple pieces in terms of the input costs to our business, we are seeing some commodity pressure some of it is related to the tariffs placed onsteel specifically and in others it's just general commodity and inflation increase maybe related to a tighter labor market in terms of away we heard on our call this morning, there were a lot of questions about looking

forward at operating ratio, which is our margin for the business ask we expressed lots of confidence that we are able to continue to improve our operating rash ya because we have a solid game plan for productivity improvement et we just didn't put a precise point on it yet. >> broadly speaking, the business looks pretty solid. you saw growth in all of the setti segments it's an economy working for you with more focus on manufacturing. is that what you see continuing in the next few quarters >> we do we see a very strong economy that we're selling into. we have had strength in frack sand, we saw strength in the steel markets and other industrial markets we saw strength in domestic as the u.s. truck market is tightening so i'd say the top line from a volume perspective looks pretty good as we look into the rest of the year >> we just talked to larry kudlow at the white house ahead of thiz trip to china where they

will try to negotiate a trade deal how big of a risk is a trade war for your business? i would think that all of those agriculture shipments that you drive to the ports could come under serious pressure if things escalate >> trade wars or more specifically tariff environments aren't necessarily good for us we thrive when consumers buy things when the industrial economy is thriving and healthy. and when trade flows are thriving ask healthy and tariffs can impact all of that they make goods more expensive for consumers. they might make u.s. goods less competitive in foreign markets and disrupt trade flows. so our hope is that we satisfy the needs for fair and equitable trade agreements, but they are also open trade agreements we have more of them, not less of them. >> your point about trucking is

well heard some of your competitors have said this week that they expect to take share from trucks because of the driver shortage we're all watching gasoline this summer how much runway is there >> it looks like there's a fair amount i think the seminole event was the implementation of electronic logs most of the most sophisticated trucking companies have been using those devices for some time but there's other participants in the marketplace for whom that was a significant burden and expense. and then also just the general tightening of the labor market is making theirs more expense i-and harder to find it looks like it has some legs from our perspective and when you add to it an industrial economy and a consumer economy that looks fairly healthy, we think it's a good environment to be competing in. >> you mentioned the tighter labor market it was reported on bonuses being paid by you and competitors to

get new employees. is that the case can you give us more sense of what your expectations are in the need to increase compensation >> yeah, that's not across the board. those hiring bonuses have been implemented labor markets around the country and our service territory where it's been relatively difficult to find labor pools for us to tap into so, for instance, you know, there might be a tight market in some rural areas like western nebraska and also around some really thriving metropolitan areas, like down in texas. but it's not across the board. and they are targeted. and they seem to be working. they're increasing the labor pools we have access to sometimes 30, 40, 50%. >> you appear to be a huge beneficiary of a corporate tax cut as a company how much do you plan to save and what do you plan to do with it

>> well, for sure, the tax act has helped us in terms of lowering our cash taxes. it will also help us in terms of -- i think it's part of the reason why our economy is doing as well as it is again, when our economy does well, we do well what we do with the incremental cash is what we've always done first and foremost we feed the railroad, make sure it's in good operating condition and invest where we see strong returns in new capacity after that, it's about returning it to our shareholders either in the form of dividends or in buy backs and we'll do all of the abov above. >> what's your outlook for manufacturing? increased focus from the administration, weaker dollar? lot of things going for manufacturing right now. >> yeah. i sure hope so it seems to me that we're in an environment where, if we get it right -- we've got some of it right so far -- i think the

current administration is doing a fair job on looking at regulation and making sure there's not an undue burden from a regulatory perspective that doesn't mean they're ignoring, making sure our communities are safe or our environment is safe. it means they're doing it in a prudent way. then we've had this tax reform that is also helping u.s. manufactures be more competitive overseas, remembering that we came from the highest statutory tax system and we're now somewhere in the middle of the pack amongst developed economies. and then you that together with, you know, a recovery that looks like it's shared around the globe for different reasons, but timed about at the same time that spells a pretty bright future for american manufacturing. that's, of course, a good environment for us. >> yeah. we certainly have seen that reflected in the stock your stock up 20% over last

year lance, thanks for joining us on the results and, of course, the big macro topics ceo of union pacific. >> let's send it over to jon fortt for a look at what's coming up on "squawk alley." jon? >> we heard from silicon valley. alphabet and facebok have had their reports. now it's seattle's turn. big can cloud earnings after the bell coming from amazon, intel, too. what that means coming up. your company is constantly evolving. and the decisions you make have far reaching implications. the right relationship with a corporate bank who understands your industry and your world can help you make well informed choices and stay ahead of opportunities. pnc brings you the resources of one of the

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good morning it's 8:00 a.m. at facebook headquarters in menlo park it's 11:00 a.m. on wall street "squawk alley" is next ♪ >> good thursday morning welcome to "squawk alley." i'm carl quintanilla, morgan brennan and jon fortt. u.s. tech editor at the economist and jaso