Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday, May 7.
CEO Interview: Donald Knauss, Clorox (CLX)
On the 100th anniversary of the creation of the company, CEO Donald Knauss of Clorox (CLX), discussed the first major bleach product made from salt water with an electric charge. Knauss said there is a misconception that household bleach is unhealthy; it isn't the same bleach used for paper, and has natural ingredients. The stock has risen 32.5% since last year, but the company missed earnings estimates and sales projections in its recent quarter. However, management raised guidance for the full year.
CLX has 65% market share in bleach, 75% in household charcoal with its Kingsford brand and 35% market share in trash bags. Around 90% of its brands rank either first or second in their categories for market share. When it comes to worries about private label competition, Knauss said, "We are the innovators ... we've got a nice castle with a deep moat." The main cause of the lackluster earnings was the unseasonably cold March that collapsed sales of Kingsford, which makes 60% of its sales between March and June. "Since I've been a CEO, I've never seen brand category like that shrink so badly," however, since the issue was the the weather, there is no reason to think that there is a problem with the brand. Burt's Bees is seeing double digit growth around the globe, and Brita is increasingly popular. Cramer pointed out that CLX yields 3%; "I think that dividend is going to grow."
With the Dow gaining 87 points, Cramer discussed the role institutional investors are playing in causing the prices of stocks to rise dramatically. There is an undersupply of certain stocks and demand keeps rising. EOG Resources (EOG), which closed up an astounding $9.65 on Tuesday seems to be a stock affected by demand from fund managers. Cramer believes that certain stocks are not being sold, and money managers are willing to pay up to have access to shares at higher prices. This causes dramatic surges in prices of stocks like EOG and currently, Whole Foods (WFM), now that the WFM bears have finished selling the stock.
Cramer took a call:
BlackBerry (BBRY) is an "unfathomable" stock; "We don't know how well or how badly it is doing."
CEO Interview: Mark Papa, EOG Resources
EOG Resources roared up 7.66% after a blowout quarter that saw a 63 cent earnings beat, a 19% rise in revenues and 33% increase in production growth since last year. The stock has gained 55% since Cramer got behind it in 2011, and is up 32% since December, when CEO Mark Papa last appeared on Mad Money. Not only were analysts surprised by EOG's results, but Mark Papa said the amount of oil the Eagle Ford produced also surprised him, "Eagle Ford gives upside surprise after upside surprise." While producing a bit less than the Eagle Ford, "The Bakken has turned out nicely."
EOG gave an aggressively positive 5 year projection for growth, and expects to be the leader in the industry. While Mark Papa said he has been the "resident bear" on natural gas, he thinks the worst is over for the commodity that was at "abnormally low" prices last year. The $4 to $4.50 range for natural gas is "rational." Cramer said he was "disappointed" on the conference call when Papa implied that production growth had peaked in 2012. Papa clarified his remark; he believes in continued growth in oil production, but believes that the dramatic year-over-year numbers for production may not be matched, and that growth might be more gradual. Papa believes that, at the rate of oil and gas drilling and production, North America could be energy independent by 2020. "This one is not going down," said Cramer. "It has great resources and a good balance sheet."
Dr. Pepper Snapple (DPS) is a beverage powerhouse with a plethora of brands. The stock has run up 30% in the last few months, and the stock yields 3%. DPS beat earnings by 7 cents and reaffirmed its full year guidance. CEO Larry Young says that many customers are coming back to re-invigorated brands they had left behind. Dr. Pepper is DPS's top product, but Snapple is also popular. The unseasonably cold weather and the criticism of sugared soda by many, including New York City Mayor Mike Bloomberg, have been headwinds. Larry Young said that he sent a package of Dr. Pepper TEN (which has only ten calories a can) to the Mayor and discussed the ways in which DPS wants to be part of the solution to obesity; he opposes the proposed ban on large soft drinks in New York City.
DPS's Motts brand apple juice and applesauce have seen double digit growth. Its new and improved Hawaiian Punch with 40% less sugar and more vitamins is a "great product," said Young. DPS has the advantage of owning both Schweppes and Canada Dry, therefore, it has a virtual monopoly on tonic and soda water in the U.S. DPS is number one in the category of gourmet beverages and mixers for alcoholic drinks. When asked about DPS' much larger competitors, Coke (KO) and Pepsi (PEP), Young replied that "we have a team that loves to fight that fight (with the competition)." Young said he wants to focus mainly on drinks rather than snacks and on business in North America, but noted many of DPS's brands are performing well in Latin America, particularly in Mexico. "Our brands are protected," he said.
Fossil (FOSL) was hurt last year because of slow business in Europe, but the stock now has buyers. Abercrombie & Fitch (ANF), which had been performing poorly, surged on an upgrade. Textron (TXT) reported an earnings miss, but it is also headed up. FedEx (FDX) has fallen from $109 to $91 and might be a buying opportunity. Mortgage insurers Genworth (GNW) and Radian (RDN) are going strong. "I agree with almost every one of these moves," Cramer said. He is bullish especially on the mortgage insurers, but concerning those stocks that might have moved up unfairly, regarding the market, Cramer said, "It's not about truth, but perception."
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