He calls it, they pulled a congress. Waiting for goodow, and a lot of others said sticking their heads somewhere else. Its trough. Jim, thanks for coming on. Well see you on the set in pebble. Thank you for having me here. I appreciate it. Thank you for coming. Join us tomorrow. Squawk on the street is next. Good wednesday morning. Welcome to squawk on the street. Im melissa lee, with carl quintanilla, jim cramer and david faber here at the new york Stock Exchange. Take a look at u. S. Futures. We should note the dow is posting its bst january in 17 years. We are looking to go higher on the dow here. Investors are awaiting the house vote this afternoon on postponing the debt ceiling. News in europe, David Cameron vowing a referendum on whether britain remains in the eu. In japan, longest losing streak in two months. China awaits data, thats out tonight. The road map in the u. S. Starts off at the golden arches. U. S. Samestore sales up 9 for mcdonalds, helped by the dollar menu and mcrib. Ibm and google surging premarket. Google gets its price target raised by six firms this morning on better than expected earnings. Coach getting pummeled this morning, blaming its big earnings miss on weakness in north america during the holidays. It says it is transforming itself into a lifestyle brand. Apples results tonight after the bell. Could this be the quarter that marks the bottom on the stock. Will tim cook talk about the next omg product in the pipeline. Well start with mcdonalds. It earned 1. 38 nds the Fourth Quarter, it exceeded estimates. Ceo don thompson said for the near term, mcdonalds expects top and bottom line growth to remain under pressure with january global comp sales expected to be negative. Jim, its come a long way since the mid80s here. Still pressure on margins. The dollar menu is tough to sustain. Youve got to put yourself in the heads of the buyers. I think the buyers say, look, in the end, it was better than expected. The stock was a terrible performer last year. They have to get it right eventually. It cant be as terrible as it was in 2012. Not a great reason for me to buy. But obviously the market is cheery. Somebody wrote me back on twitter, saying, im not loving it, im look it okay. Like it. The u. S. , interestingly, was not the problem this time around. It may have had something to do with being open on christmas day, pushing the mcrib in december rather than january. Give us your enthusiasm level. I dont have much. I just think that there are a lot of stocks that have moved up a great deal. So you might be looking for a stock that hasnt moved. This one hasnt moved. You could argue theyre starting to get it together a little more. They obviously promoted the dollar deal. It brought people in. Again, i think people are really searching for something to buy. Theyre willing to buy things that arent necessarily high quality here. I think there are a couple of questions when it particularly to december comps. Last december was a very tough quarter because it saw 9. 8 rise in sale. But they pulled the mcrib in december. In terms of the store opening on a day by day basis, it may not necessarily be comparable theres the mcrib. I havent had a mcrib in five years. I know. But you speak about it very enthusiastically. That is true. The other issue at mcdonalds is what a lot of other Food Companies hf highlighted, and that is rise in costs. Brinker yesterday talked about it. Theyre in the casual dining space as opposed to the quickserve space. When you talk about rising costs, you have to wonder about margins for mcdonalds. Look, take a look at some of the stocks coming by the ticker. Novartis is up. The chairman leaves. So maybe something good happens there. Parker reported one of the most disappointing quarters on friday. Everything was bad. Everything. The stock went up. This is just part of the animal spirits moment. You get caught up and say, all right, im going to find a reason to justify buying mcdonalds. Im going to say that im not going to look through it. They beat the number. And thats whats been going on. Yeah. People find reasons to buy. Because they want to be in this market. Thats a reflection more of the market itself. Thats my point. At what point does that potentially end, or is that something thats going to be sustainable . Go into some of the quarters and say, look, dont worry about the second half. Dupont yesterday wasnt that great. But the top number was good. Like mcdonalds. She came on, ann coleman, said good things about the second half, tio margins bottoming. All of a sudden youve got a story. If somebody downgraded dupont today, people might say, thats my opportunity. People want to be in stocks that are still down from their highs, whether it be the october highs of last year or the highs of 2011. The question i have, is this a mcdonalds story, is this a sector story . Do you not like the restaurants in general . It seems a lot of the headwinds that face mcdonalds face the rest of the industry. Maybe it extrapolates the rest of the industry has problems as well. Chipotle did have problems. Chilis, nothing exceptional at all. One thing tossed out, theyre not building any chilis. We have enough chilis. Saturated. We dont need anymore. Were overchilied. Or chilied just enough. In all of American Media is the graph on the cover of usa today. Likelihood well trim spending in the next six months in eating out, 59 . Thats a large number if you look at the next six months. The Consumer Confidence would back that up. Look, i go into mccormack and watch that stock all the time. Thats when you want to cook at home. That does very well. I also see stocks, again, like pinero where people are going out and liking it very much. Darden seems to be missing the execution. People arent going to olive garden as much as they used to, red lobster. Very uneven whats going on. Yeah. On the brinker call they talked about disconcerting trends of people not going out as much. It seems like its overall, jim, you make the point, people want to chase the dips. The tenyear is up above 18. Vix at a fiveyear low. I think people are being worried to being led to slaughter. You dont think thats happening yet. Coach is bad, no two ways about it. Coach is terrible. So coors goes down. I think at the end of the day, people say michael coors is winning. Because nordstroms didnt report a bad number. Tiffanys. There is other jewelry thats good. Execution is playing a big role. The execution for coach is horrendous. Its horrendous. I dont really know what happened. Lou frankfurt is a good manager. I just cant grasp it. Its been going on for a while. It was an 80 stock in april. Right. Now its a 50 stock. Obviously taking a hit in the premarket, the luxury goods maker said it earned 1. 23, below forecast. Revenues also missed as jim said, lou frankfurt said the Holiday Season proved challenging in north america. Comps down 2 in the quarter. Over the last decade they said we built coach into a leading accessories company, now transforming it into a Global Lifestyle brand anchored in accessories. Thats anchored in couponing, which is what i hear theyre doing. I find when look, theres many ways to tell to put a little lipstick on the pig. This was just nothing that i want to buy. Maybe someone says, you know what, next quarter will be good. But i just id like to have a Little Something to hang my hat on here. I dont have it. Accessory or lifestyle my fossil. July 31st of last year, it opened down 19 . Wow. I dont know if you remember that day. Weve been down this road before with these guys. Theres a level of consistency thats starting to bother me. Whats that reflective of. This is a Management Team that has been lauded for years as having been ahead of the curve, having appropriately merchandised this company. And so how do you suddenly start missing it . Is it focus . Is he doing Something Else . Whats going on . Uggs was great for a long time. Developed the rockport brand, and then it cooled. Maybe coach, like tiffany, is old. Maybe theres an old theesis in this market. Maybe its oversaturated. Frankfurt did talk about maintaining their pricing strategies, despite the retail climate which protected their brand. It sounded to me not like couponing, but maybe the opposite, maybe they didnt coupon enough. Someone about six feet from me opened a bag and it was couponed immediately. She went on i was like thinking exactly that, that theyre preserving. Nicole was saying, listen, you can believe that, or your eyes could be lying, because ive got a coupon for my coach bag. We need a nicole cam is what we need. We could just go to her all the time. This is not the coach bags that you can get on canal street. Those seem like the kate bags that i see on canal street. They may not be as not as high quality . No, like the watch i bought down there for ten bucks, which worked all the way to the subway. The whole way. Wow. Sounds like a block or two. Once you got on the subway you couldnt get off the subway, it broke. But i got at least a solid six minutes. How much is that per minute . 5 a minute . Does it make you want to buy kors more or less . God bless you. Thank you. You have something i dont want to catch. Im actually very healthy. But sneezed. I think that, you know, what happens here is by midday, someone comes out with a, hey, listen, i talked to kors, or its a quiet period but i think its okay. Look, this luxury end is very challenged. I would rather buy nordstrom than kors. I dont mean to punt like that. I dont mean to slide with my leg and trip and read like that. Like tom brady who wears uggs, which, by the way, is a mistake. My pal . Thats true. We do hang out together. Yes. And married to supermodels. You take your life your hands when you say, listen, i know kors is good. My supposition is kors is doing better than coach. That doesnt necessarily produce something thats good, because ive got so Many Companies that have reported really good numbers that you can buy. Like a travelers. I think travelers can go dramatically higher. Travelers is an insurance company, its really boring. It was an unbelievable quarter. So i switched directions, played generals and said, i would rather not buy kors, i would rather switch to insurance and buy a stock that could go up dramatically. Jake fishman is a great businessman who doesnt promote himself. Lew frankfurt is on tv a lot. I love lew. Everybody here on tv loves lew. Fishman knows how to put together a quarter. You love lew, dont like the stock. I like david novak. People sell young. Even though coach wasnt bad in china, will they now sell young. Because people extrapolate everything. Were going to get to google and ibm and talk apple tonight. In the meantime, weve given you the lowdown on mcdonalds. How is business at pinera . Well talk to their coceo. And james gorman live from the Economic Forum in davos. What will he do for an encore after his firms blowout quarter. Futures trying to muster enthusiasm here with the dow opening up 33. Squawk on the street back in a minute. Analysts were encouraged by a rebound in online ad prices. Theyre expressing concern that the faster growth is growing in googles lower margin businesses. Fourth quarter products of 539 a share. And growth in emerging markets. Big blue said it used current earnings below wall street estimates. Ibm and google helping to put juice under the futures this morning, and helping the dow on its streak. It is the best january. Dow up 4 so far. Ibm is a its a reset for us. Because we spent a lot of time talking about sales. And the idea is if the sales are to good, you should sell the stock. Ibm is the exact opposite of that. This stock has moved from 125 to 200 on not great sales. What theyve done is make a fortune with what they sell. When you have Gross Margins for software youll make a lot of money. They had an aggressive fiveyear plan for 2010, because 2015 you earn 20. Now its going to be easy. It was a lot best call. People recognized that they figured out a way to do acquisitions, buy back stock, do a good dividend and make a lot of money. The bears countered today, how long do you sustain relatively flat revenues. Right. With bookings that are showing snamaller and smaller growth year over year. The answer is, you wont have to sustain them because theyre going to go higher. I was gratified by ibms call. By the way, jim was not on the call. I also like that level of confidence, frankly. But this was a terrific, terrific layout of what theyre doing right. Social clout, selling some hardware, new products coming out. I said, why is that stock going up . Sales were light. The answer is, because they are making fortunes. I think the question this morning is on valuation. I know isis Brian Marshal said, what do you pay for a Mature Company with minimal Revenue Growth that promises about 10 eps growth. He came to the conclusion that around 190 its fairly valued. Which is below where its trading right now. It doesnt help us. Where does that get us. Obviously what were trying to do mcdonalds, ill pay 87 for mcdonalds. Dupont at 43. Youve got to deal with the reality, which is that people were surprised. The last quarter was really bad. And on the Conference Call, people said, wait, what happened . The answer is, well, business got a little better. We said there was pushback on some orders. Sure enough, it was pushed back. I think were all struggling to deal with the realistic nature of how can we justify these moves. How many stocks have been downgraded because they hit the price target. The answer is, in a real bull move, which i think is what were having, you end up saying, 3m, i downgraded in 92, i guess i have to upgrade at 105. United technologies. When they reported immediately, the stock was down. It was like, no, the orders were gray. Im not trying to alibi the market. Im saying the analysts better provide some value out of here. Im not getting it from a lot of analysts who are saying, you know what, i really like if home depot goes to 47, im all over it. Thanks for nothing. We should mention alice raising their price target on google by a lot. By a lot. Reporting after the bell yesterday. In speaking to a couple of the owners of that stock this morning, you did come into the quarter with relatively muted expectations. Someone said to me if we dont see at least 10 sequential growth from this company, maybe it doesnt deserve a growth multiple. Cpc rates of decline are slowing. The cost per click, while at the same time you have click who are growing. On mobile, youre more likely to click if youre looking for something, looking for the movie opening, looking for the restaurant. Youre more likely to click through. More opportunity perhaps from mobile in a sense. Generally speaking, it seems to have been a positive quarter. And being well received by investors. Theyre talking about profit. Theyre even in china, by the way. Thats interesting, because people dont think about them in china. This was a great line, just a bit of color on motorola. Just to remind everybody, we do care about profitability. Ive often spoken about this company being in its own world, where they dont want to play by the rules, but here they go. Motorola is not profitable yet, but theyre taken the loss down appreciably. Were not in the business of losing money. I love that quote, that was my favorite quote. Amazing how many businesses have had to say that outright. Instagram, google. Its a good starting point. Look, i thought the mobile was really good. If you come away from the quarter saying, another one. We were down 100, and we know what were doing, and weve come back. Facebook, we didnt know what we were doing. Give the benefit of the doubt to google, because that last quarter was not so great. This last time they did a good number. I like the number. Yesterday we showed you how cramer was right about the fed back in 2007. Youll want to hear his take on some stocks worthy of mention. Futures moderately up here. More squawk on the street when we come right back. But we can still help you see your big picture. With the fidelity guided portfolio summary, you choose which accounts to track and use fidelitys analytics to spot trends, gain insights, and figure out what you want to do next. 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I save money by using fedex ground and buy my own supplies. Thats a great idea. Im going to go. We got clients in today. [ male announcer ] save on ground shipping at fedex office. About six minutes to the bell. Were waiting in earnings, jim, the mad dash focusing on rails, too. On squawk this morning, csx and norfolk southern, this is an endless story about how coal is killing them. Down 18 , 19 . Listen to the president. The president is determined to make us a less coalbased country. And ive got to tell you, this is a coalbased country. But ksu, kansas city southern, okay. They have coal. But they also have auto. The other guys have auto. But they have mexican auto. There are four new gigantic plants being built in mexico. They have tremendous business with sand to fracking to get oil out of eagleford. This is the one. I know its up a lot, but people want growth, carl. Only kansas city has growth. Csx did make comments on auto. Growth would be good, but not as good as the back half of last year. Auto is up a little. How often can you shoot the lights out. They do favor general motors. Im saying that the rails as an indicator of the economy, may be failing, because they are so coalbased. But Union Pacific reports tomorrow that is less coalbased and i think they blow it out. Union pacific is a winner. Interesting point. Well get a lot more after the break. Stick around. Well see how mcdonalds opens for trading now tha