Sectors including the consumer from mcdonalds to chipolte. Breaking down verizon, dupont, and, of course, netflix. We sit down with the ceo, the presentation on the company slated for later this morning. First up, food and drink in the earnings parade. Mcdonalds misses with the second kwaurtd numbers, and flat with the period, up sharply on stronger than expected q 2 results and then theres coke with a slight earnings beat and revenue miss for q2, unit case volume up 3 globally, but flat in north america. The ceo was asked about results in the region earlier this morning on squawk. We were pleased with our north american results, first because cocacola grew. Secondly, because our pricing was very strong in this Second Quarter that just passed in north america. Our price makes sparkle beverages up 3 , three points. I think when you take the totality where we are in north america, i think were making steady progress. Thank goodness for china and india, up 9, 10 . They call it a low quality beat because of the tax rate. I think thats true. I think cocacolas a challenge the company because they make a product people are moving away from. I think they move away from first in the United States, go overseas, and its a product that is really our parents product or my generations product, and younger people are not drinking it. Theres a demographic change were seeing in companies, and cocacola is not popular with younger people as it used to be. Brands within that cocacola umbrella with the capacity to figure out ways to meet wherever consumer demand or taste is going, dont they . When are they going to do that . I just think that when i look at cocacola, listen, a great executive, but, you know, im not going to be satisfied with no growth. Companies are growing like mad. I know chipolte is a small company, but 17 growth, that means the customer knows something. They like natural and ogranic. Beef, this quarter, they made adjustments and trade down with the chicken, but i think when you look at chipolte and cocacola and mcdonalds, you cant say, you know, they are doing well. I mean, this is not why you invest. You dont invest in order to have big buybacks and dividends boost. Sure. I just said they almost had to report backtoback, mcdonaldss chipolte because of the story it tells, the innovators dilemma, father and son. Mcdonalds, second earnings miss in a row. Three consecutives misses in a row, jup down 3. 5, and the yield, jim, not so much a shield when you have the prospect of higher rates. They are one of the lucky companies out there because the Interest Rates stayed in the 10year 2. 5 . By the way, first of all, when you go through mcdonalds and cocacolas release, people at home say, wow, terrific. Sales decreased 1. 5 . These are done with mirrors people. This is not what you want. You want to see scores in double digits. We didnt get that other than chipolte, but they have something people want. Mcdonalds does not. I think thats seminal. Thats not going to change. Youre not going to get a tofu big mac. Not any time soon. Right. So freda had 3. 5 i dont know if you had freda, but its a total tofu dish for vegans, and its growing like mad at chipolte. People prefer and it tastes quite good, by the way. Look, i go to mcdonalds. I admit i happen to love you know, the mcmuffin, i love it. I have not had a diet coke since my resolution was not to have a diet coke. I have not had one, no indict dew, my loep vice, i know, haha, but i feel great. Really . Just because of that . Yeah. Good. That an the gopro on my dogs head. Here we go again with the gopro. Do you buy chipolte here, i dont know what the multiple is . I dont know. Buy up 10 . Boy, they bought stock cheaply themselves. Its not my style, an International Event makes it go down, thinly traded. Viewers say, please split it. Tim cook didnt agree with the split, and next time, hes focussed on create product, and chipolte, go over the quarter, the comparables are different. Food with integrity beat the information, you know, the farm bureaus information. Remember the International Foreign international bureau. Farmed and dangerous, which is the they did videos, the scarecrow videos, those worked. They dont spend a lot of money on advertising. They give the customer what they want. Teen males, this is important. I remember being picked up by the police in springfield county. Why . Because i overstayed the curfew at mcdonalds. What a metaphor for when youre 16. Now, those teens, they go to chipolte. I dont know about the curfew thing, but all the generational things you mention. The mall, right . The mall. Chipoltes mcdonalds the greecy food equivalent of kors and coach. Oh, i like that. Not the only names by a long shot. No. Netflix, talk about that, how could we not, earnings more than doubled as global subscriptions beat expectations surpassing the 50 million mark. U. S. Membership grew to 36. 2 million, thanks to orange is the new black, and they expect more vub scribers, and subgrowth was fine, but, really, you know, the international is where they are showing significant traction, spending a great deal of money, but many believe the trajectory is positive for them. There had been concern as they raised prices. You know, people are on and off net fl netflix. If you are off, you have to pay more because youre grandfathered in at the lower rate if you keep it. People thought that would bring the churn down. International is what they wanted to spend time talking about. Yeah, versailles, what . Noir. You know, the joke about international, and people are kind of they have a form of their they release substantive numbers what they are looking for, and they have a q a. This time it was Reid Hastings with doug amith and what i think came out on this quarter was, okay, look, internationals got to be really great, but maybe the growth domestic peaked, and i think a lot of people worried about that little number there, 7. 7 billion dollars in obligations. When you watch netflix, and i think netflix is basically utility, you are amazed how few streaming movies they have. Right. Its not a streaming movie service. In fact, if you want the old movies, you have to keep the mail service. Netflix denzel. They have three denzel movies. Isnt that the problem . Its a metaphor. You do not have they have a great index, hit them on, oh, thats not on, thats not on. How much does it cost to have all the things . The movie studios are wise to the fact you dont give it to netflix, what will that cost . A lot. Right, thats why people are worried about the obligation. The stocks not up. I think its seminal that the stock is not up, people said on the network its going up. Turned out not to be. Youve been talking about the fact that people focus on sub growth which does not look bad. Are they changing focus . I think 50 million was the whisp whisper, and you had to do more than that. I think in the end, the there was a smugness. There was smugness on the call. I dont like that. Chipolte had humility on the call. The linebackers, people throughput they got eight additional people per hour. Thats been a big number. Theres no hubris on the chipolte call, okay . There was hubris on the netflix call. Chipolte didnt get 31 emmy nominations. True. Interesting that im on record. Global is increasingly making its way into other parts of the business original content now, this marco polo project is aim at demographics outside of north america and physical gift cards giving people a chance to hop on as a gift. Thats true. I mean, new certainly absolutely new venues to sell. You know, i also heres a little this is the kind of thing im hubris. At 7 00 million broadband households is the market. When i see that thing. When i see that theres 8 billion people in the world, well, thats the total i dont i get uncomfortable with that. The total adjustme menmentble m not every person in the world takes netflix. They are saying broadband. I like netflix as a service. They need more streaming content, spend more to get streaming content. You want matel in stock, and when an analyst upgrades and does not move up or down, thats tough. This is conceivably a day to look back on or look with importance that begin they delivered and the stock is not higher . Im going to say yes to that. You are . Yes. When i was going through the call, i said, okay, they did that, makinging a joke about france, france likes movie, and marco polo, im thinking, i dont want to see that. Orange is new black, thats hot as you can get. You know what i think of marco . You swim a lot. Marco. Polo. You dont play marco polo . Id like to. I have a vision of you and all the guys at the club playing marco. Thanks for that vision. As bill ackman prepares to blast the company, John Desimone defending the maker. Well talk to him next on a first cnbc interview. A look at futures, and the s p has not had four straight down days this year. Up believable. Now, come on. What a great stat. Thanks to steve at dow jones. More squawk on the street from the nyse in a minute. We started zya with the thought that the kid on the back of the bus might have a song that he has in his head but he just cant get out. With the technology of cloud, we change all that. I can sing something into my device, up to the cloud it goes, back down it comes, sounding better. We break down the walls of creation and we give music creation for the masses. Unlock the creativity in anyone. With the ibm cloud. The ibm cloud is the cloud for business. What happened . Life happened. Stress. Fun. Bad habits. Kids. Kids. Kids. Now what . Not milk. Not sheep. 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This morning in new york, persing squares bill ackman says will expose incredible fraud and why the company will collapse. Herballife is fighting back. We are at hq with the cfo on a first cnbc interview. John desimone is with me. Good to see you. Thank you. More than 500 people are in a theater in downtown manhattan, bill is preparing to give his latest presentation, and they are watching the interview live. He says, in his words, hell expose incredible fraud at herballife today. What do you expect many. This is always the the bark is worse than the bite. He likes to, you know, i really dont want to talk too much about bill ackman, but the sub staps of this. We have to frame the event, and similar to events hes had. Everything is a gotyou until its not anymore. He made 435 accusations over the last 18 months, each one is the lathest and greatest until its prooup not to be. Hes we want after belgium when it was in his favre, but in our favr favor, he discredited it. He did everything in his power to clear the audit, went public and said how can people invest when theres no audit, and when it was, it was not important anymore. He claims today he has hundreds of hours of video, audio, documents to support his claims. On some level you must be worried about what happens today, arent you . Im not worried about the substance of what he has. You know, theres no doubt that hes missing the real animal jis and research. Its propaganda base. I dont know that he understands clubs, but well listen. What he is missing that fundamentally we have millions of customers that enjoy the product, use the pruk, and thats indisputable. We had a release today from a former ftc economist that concluded, in fact, we are a beneficial multilevel markets company, and that former economist had access to all our data base, access to all of the studies, created their own studies to have that conclusion. A study you commissioned . A study we commissioned, but an independent with no ties to herbal life until we commissioned it, but we did so the economist looks at the business in the light similar to how the ftc would look at it. So you say ackman made unstanuated claims and put misinformation out there among other things, the company is invis gaited by the ftc. At least one state that we know of, a u. S. Senator wrote a letter to regulators asking them to look at your business model. Are we to believe, given all that swirling around herballife, that the company is operating as it is supposed to be operating urn the law . Absolutely. We have complete confidence in. I think the inquiry puts this behind us, a lot of misinformation there in the marketplace, and bill ackman, actually, when he presents o unopposed, he sounds compelling, very confident, you know, comes across as though he knows the facts, and it can be scary. Having a regulatory body thats objective looking at the Company Benefits us. Well, unopposed, i mean, look, be honest, youre sitting here today, but michael johnson, the, has been virtually silent on the issue for 18 months. Youve let bill ackman control the knavetive, havent you . Our key role is to deliver results. Thats what we focus on. When bill came out 18 months ago, we divided the company into teams and decided michael, that walter, the president , the coo just focus on performance. Thats michaels job. I think that we gave mr. Ackman too much of the podium. That will change. Theres an ogranic drive in the company. We have 550,000 districters and members in the u. S. , and theres an ogranic drive within that group for us to tell the truth about herbal life. Theres been instances, and im sure youll readily admit where distributors of herbal life made claims about the product that may not have been true, have said things that you, as a company, had wished they hadnt. You started retraining people as a result. Correct . So lets put it in context because we have a fourprong approach to compliance. Its integrated. The first so we have 550 members in the u. S. We have more than 3. 5 globally. Within the group, the overwhelming vast majority want to behave with the rules. First prong, educate and train so they know how to behave. Secondly, those who cut corners, we have to detect and detour that behavior. We do that very well. We have some Cutting Edge Technology that we use on word recogniti recognition, Voice Recognition of videos that help us get better, but the reality is, 3. 5 Million People is a big city. With that many people, the police does not always know whats going on. You had to reprimend people. We have. Detour and detect, but when somebody signs up, we have a voice with them. We cant be on every phone call to someone they recruit. We make sure we communicate with each new member. Used to be pushing the materials, but we pull them to the materials where they have to acknowledge they are aware of it. Most important fail safe is no matter what somebodys expectations are coming in, we have the protections to give them the moneyback guarantee, we have a 90day 100 pay nor return shipping on the starter kit, and if any time a member wishes to leave because it did not work, we buy back 100 and pay for the shipping of the products they did not sell. Its low risk. We expect he talks about the nutrition clubs, and the critics of the clubs ask questions such as why are there so many . Why are they located in a tremendous amount in very concentrated areas . Why are they unmarked on the outside . Why are they secretive . Thats what the critics say. How do you respond to that . You heard that before. Its not secretive, but theres foundation to be discussed first so people up understand what is club is and how it operates. Its from a consumer and operator point. It started in peoples homes. No different than avon, tuperware, pampered chef. Its a product that helps them lose weight because social support and encouragement helps people lose weight. Picture a dining room where people are gathering. Because weight loss requires consistent use of the product, they took that model, and they moved it think of picking up that living room and moving it to a commercial location. Its nothing more than a living room or dining room of one or two members working together to create a social network to help people lose weight. When you think of multiple locations, its peoples living rooms now in a commercial establishment. Why theres no signage . Thats an important point thats misunderstood. Indirect selling. Its protecting the opportunity for the second sale. This is channel protection. For, scott, if you were to sell herbal life, when you sell it the first time, you want the opportunity for the second sale. If you knew your customer could go to walmart and buy the product, you are demotivated, right . People who offer direct selling do not offer through mass. Avon failed, they tried through target, fails. We have 5,000 clubs. Majority of the members do not do clubs. To protect their business, there has to be a level playing field, cant appear as though theres 35 clubs in a state. We make it its a persons living room, a persontoperson selling. Its channel protection only. Right. I mentioned its a busy morning on the earnings front, and we have to leave it there. John desimone, i appreciate the time, and if you want to come back later today on the halftime show to respond or refute he says in the room today, wed like to have you back. Great, well thank you. Carl . Scot, thank you so much for that great stuff. Ackman a half hour away says by his own words, jim, most important presentation of his career. I thought this gentleman made good points. I mean, there were we said there was many objections to herbal life as there were Congress People . 435, i think thats where we are in the house of representatives. At a certain point, if ackman comes on the network and basically calls something a fraud i called a company a fraud on tv, and fcc came after me immediately, and the company was out of business by the time this is 1999, and i remember. Remember that . Yeah, i do. I wont mention names for fear no, no. The fcc said, look, you cant call a company a fraud. Interesting how times have changed. I was not short the company. I had no interest in the company at all. Just went out of business. Now a guy on tv says its a fraud, fcc says thats okay. Do what you want now. Up 7 the past couple years when ackman started getting short. Say its a fraud. People want to sell the stock. I dont want to own a stock people say is a fraud. Opening bell in a moment, and look at the premarket. More squawk on the street in just a second. 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