david farr is the chairman and ceo of emerson electric.e had a better read on how the company's doing and what's going on with this activist challenge. welcome back to "mad money." >> thank you. >> good to see you david. >> good to see you again, jim, thank you very much for having me. >> this has got to be for you and a couple of real industrialists in this country, got to be one of the hardest times. it seems like if it weren't for governments you would be hitting it out of the park. >> emerson is performing well right now. we just finished our fiscal year, we're going to grow sales 5.5%, our ebit margin is going to be up cash flow is going to be up. we paid back $2 billion to the shareholder. clearly the market dynamics are very difficult, and last june or this june i talked to the board about some major restructuring because what i saw as a slowdown in the cycle, which is a little premature between dhoochina,ss united states, a very weak europe i told the board like i did in '16 we need to take a hard look at the company, what are we g

>> emmerson, david farr, a ton of business in china and ritch allison, the most important guest todayhe re-set. and i think the reset is most welcome. you need to be able to recognize that these companies that are backed by venture capital, they're not going away and they made it so there's an equality of delivery that's quite different from the way it's been >> jim, a lot to handle tonight. >> wow what a moment. >> "mad money" at 6:00 p.m. eastern time don't miss it. when we come back more coverage of this significant, but moderate sell-off. the s&p 2905 you should be mad that this is your daily commute. you should be mad at people who forget they're in public. and you should be mad at simple things that are unnecessarily complicated. but you're not mad, because you're trading with e*trade, which isn't complicated. their app makes trading quick and simple so you can strike when the time is right. don't get mad, get e*trade and start trading today. ♪ ♪ >>> good tuesday morning welcome back to "squawk on the street." i'm carl quintanilla and morgan brennan and david faber at post nine

i had david farr on. dividend aristocrat and to me that means you have a company that is solid, that people can be in i think individual investors have been driven off because they don't understand the point of the mark. they thought it was dividend you can say they're unsophisticated. if elizabeth warren comes in, i hope she keeps a dividend tax low so you feel it is worth taking a dividend check. >> you can't both be true so she hates amazon because they're getting into these industries and outinvested everyone else. okay, so you don't like that amazon does no buybacks. that's one model of what to do with excess capital. if you don't like that, what do you like better? do you like dividends? okay let's not have a tax rate that confiscates money that has been taxed at the corporate level your example, emerson earns money, they get taxed, they pass it on to steve y shareholder and he gets taxed. do you want more would-be amazons who monopolize and get into industries they were never even in and don't do d

after david farr retired in 2021, '22. he's a good ceo. wants to create shareholder value. with a new restructuring plan. i firmly believe when they reiterated guidance i don't have to worry about earnings i have to worry about something good happening that they will see better profitability than what most people thought because they will make changes >> jim thank you for joining us. stephanie we're not letting you go just yet. meantime some breaking news on vaping related illnesses >> reporter: the centers for disease control has come out with a new number most updated number right now they say they are looking at 1,080 cases across 48 states 18 deaths reported from this vaping related illness those deaths are across 15 states this is an increase of about 275 cases and actually it's an increase of 275 cases since last week the agency reports that the increase can be accounted for by both new case and reporting of previously diagnosed cases most of these cases are -- do involve thc containing products, a small number contain only nicotine products. agency officials in the p

. >> david farr, long serving ceo of emerson under fire because people feel that it is time for him totentially he said he'll move on 2021 >> there is a group of people -- a group of people right here in your cortex that say that it is time for fred smith to go. >> right >> that's what you are really saying you didn't want to say it. >> you said it for me. >> i did >> this stock -- >> i think fred smith is one of the great executives of our time i think that on that conference call there was an open re bebelo call what you look at is perhaps there is going to be a real change coming. and if you want to vote for rebellion, listen to the united natural foods call, they're begging for -- please help us, please help us, tell us how you do it, enough. that's how you get a stock down. stock is down a lot. >> big hit >> was that a similar rebellion on the call? >> that was just that was insurrection >> it is down 26%. small market cap company. >> ford is quickly -- ford is quickly back to the -- probably call it a six-month low. down 5%. if you missed phil lebeau with the numbers. overall the

public utterance since the report of it potential activism first surfaced it offers an indictment of david farrctors who have presided over a significant short fall over the last three, five and ten years, when measured against emerson's peers in the automation or hvac industries, not to mention the ten year lag of roughly 120% versus the s&p shaw focuses on a history of capital allocation since farr took over as ceo since 2000, emerson spent $14 billion in capital when accounting for m&a and capex but increased ebitda by $400 million. the resulting 3% pretax return on incremental capital severely lags almost every one of its peers who posted an average return of 11.4% during that same time period. one culprit for those poor returns on capital, shaw maintains, a cost structure that includes the highest levels of sg&a relative to sales among the peers. the lowest revenue per employee versus those same peers. and a broader universe of industrial companies the report cites the 18 different facilities in the city of houston another, the company's aviation department, that includes eight airplanes,

i had emerson on david farr, i think they're too china.na versus not that much china. too china. 3m is too china. >> united technologies. >> a lot of china. but diverse foversifdiversified. all the growth it so smart for greg hayes to say, listen, otis, isn't going to happen. i want it off my balance sheet the merger with raytheon, we don't talk about that. raytheon up 30 points, very quietly. >> a special case. >> defense is -- look, everybody needs -- it is amazing how when you look at what the saudis have, you look at what the turks have, the kurds is hard to understand our great ally, the turks have tremendous military, and they have universal -- by the way, universal participation in the military but you see how much arms we provided to everybody, we did do -- >> so if these industrials are reflecting maybe a china deal, pmi stabilized, can the fed -- >> gets you off the hook i don't think he's off the hook. i think there is still -- the yield curve is what is going to be maybe his friend. if we get long rates up. i think he's committ