Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday March 1.
Ascena (ASNA), Tractor Supply (TSCO), Brown-Forman (BF.A), Petsmart (PETM), Safeway (SWY), Kroger (KR), Honeywell (HON), Exxon (XOM). Other stocks mentioned: Papa John's (PZZA), Dominos (DPZ), Diageo (DEO), Whole Foods (WFM).
Cramer discussed 9 things to watch in the week ahead:
Ascena (ASNA) was a Mad Money favorite, but lately the stock has been disappointing. "I think it has let us down," when so many retailers are doing better. Cramer would pay attention to earnings; "We need to see a solid quarter."
Tractor Supply (TSCO) has an Analyst Meeting. This go-to farming and gardening growth stock could take out its all-time highs if it has a good story to tell.
Brown-Forman (BF.A) is a hated stock, although the liquor trade is working. Cramer thinks it is likely to tell a strong story for its Analyst Day, but if it disappoints, Cramer would buy Diageo (DEO).
Petsmart (PETM) reports earnings. Cramer thinks that, in spite of bearish sentiment, the pet business is in a secular uptrend.
Honeywell (HON) remains one of Cramer's all-time favorite stocks. He expects a positive Investor Meeting for HON.
Exxon (XOM) has been unable to grow production and is ultra-conservative, so it is unlikely to give a bullish picture for its Analyst Day.
Kroger (KG) along with Safeway, has been taking market share from Whole Foods. If Safeway and KG give strong news about their fundamentals at the expense of WFM, Cramer would buy Whole Foods on weakness.
Jobs Report: Cramer is looking for a "Goldilocks number"; one that is not so high as to create worries that the Fed might raise rates on a stronger economy, and not so low that it will cast doubt on consumer confidence. This might be the most important data point of the week.
Cramer took a call:
Papa Johns (PZZA) had to re-state earnings for the past few years. Accounting irregularities are usually a sign of a Sell, but in this case, it doesn't matter, because while Cramer thinks Papa John's is good, Dominos (DPZ) is better.
On Squawk On The Street in January, following Elizabeth Arden's (RDEN) disappointing quarter, Cramer said he "wouldn't even mention Elizabeth Arden (RDEN) in the same sentence as Estee Lauder (EL)." Following that comment, RDEN's management sent Cramer a letter detailing its turnaround story, and now Cramer is blessing RDEN as Buy, but only on speculation.
RDEN reported disappointing numbers and slashed guidance; the stock fell 16% in one day, and is trading 10 points off its high. However, management is revamping RDEN's packaging, counters and advertising. In the stores that already house these more appealing counters, RDEN's sales have increased by 24% domestically and 9% internationally, year over year. The company has eliminated under-performing brands and is emphasizing successful products like Elizabeth Taylor's White Diamonds and Justin Bieber's colognes. The bulk of the company's revenues, 68%, come from fragrances, where it has 70% market share in mass retail, 50% share in drugstores and just 5% share in high-end department stores, where RDEN has room to grow. With the new packaging and the spruced up image, RDEN plans to appeal to the luxury market. The company has 34% overseas exposure, and is expanding globally. The timing of the Chinese New Year is one factor management identified as holding back earnings. With lowered guidance, analyst expectations should be low enough to beat next time. Estee Lauder, a company Cramer says is "worthy of intense praise," trades at a multiple of 21 with a growth rate of 14.6%. RDEN is cheaper, with a 13.5 multiple and 12% growth. Cramer likes Estee Lauder, but now, he would mention the two companies in the same bullish sentence.
While it might be a good idea to invest in a turnaround story, sometimes it is a better idea to stick with best-of-breed. Lowe's (LOW) and Home Depot (HD) should both benefit from the housing recovery, but HD seems to be doing a better job of cashing in than LOW. Lowe's reported a 3 cent earnings beat with higher than expected revenues, but its guidance was disappointing. The stock dropped 4.8% in one day, and erased most of its gains for the year. LOW's results were a drag on stocks, because its report caused some to worry about the health of the sector, until Home Depot (HD) reported a day later with a 3 cent earnings beat and a 13.9 increase in revenues. While HD's guidance wasn't as high as expected, HD management has a reputation of being conservative with guidance, and therefore, its lowball guidance was forgiven by The Street. HD's quarter brought back confidence in housing and with it, ironically, LOW's stock, which is above where it was when LOW reported earnings.
Why is there such a difference in the performance of HD and LOW? Cramer believes it is a matter of execution; HD is a better-managed company. While both companies beat earnings by 3 cents, HD's same store sales rose 7% and LOW's same store sales were 1.9% higher. HD's sales per square foot rose 13%; this metric was up only 3.2% for LOW. HD instituted a buyback of $17 billion or 16.6% of HD's market cap. Lowe's buyback was $5 billion, or 11% of its market cap. HD boosted its dividend by 34%, and now it yields 2.25% compared to LOW's dividend at 1.6%. HD has the advantage of nearly completing its remodeling, whereas Lowe's has just begun. In addition, HD stores are closer to highly populated areas, giving HD the advantage of convenient locations. While LOW has a multiple of 15 compared to 16.9 for Home Depot, it is a better idea to pay up for HD than to take a chance with LOW.
Cramer took some calls:
Deere (DE) is going down because the price of corn is declining. Cramer would stay away from Deere.
Costco (COST) is growing aggressively and pays a special dividend. Cramer thinks the stock may reach $110.
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