Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Thursday April 22.
Apple (AAPL), Verizon (VZ), Chipotle Mexican Grill (CMG), Netflix (NFLX), Boeing (BA), Goodrich (GR), United Technologies (UTX), BE Aerospace (BEAV), Standard Pacific (SPF), Masco (MAS), Goodrich (GR), Pier 1 Imports (PIR), Fortune Brands (FO), Sherwin Williams (SHW), Whirlpool (WHR), Home Depot (HD), Sears Holdings (SHLD), TJX (TJX), Bed Bath & Beyond (BBBY), PNC Financial (PNC), Marriott (MAR), Wynn (WYNN), Starwood Hotels (HOT)
A 9 point rise in the Dow and a fraction of a percentage uptick for the S&P 500 isn't usually something to write home about, but make no mistake, Thursday was "one of the wildest days that we have had in ages" with a 112 intra-day swing of the Dow, said Cramer. When the market's movements are so volatile, it helps to know what to expect, and Cramer discussed five main themes for this earnings season.
1. Explosive Growth. Apple (AAPL), which is "the greatest growth stock I have seen in my life," according to Cramer, declined on Thursday morning and then jumped ten points in one day. Why? Verizon (VZ) didn't mention Apple in its conference call, but when Verizon confirmed later in the day it would be selling iPhones, Apple's stock soared 10 points. The potential growth for Apple with access to 92.8 million of Verizon's customers sent the stock up.
Cramer called Chipotle (CMG) "one of the truly fantastic growth stocks of our time" because it supplies "tasty food that does not give you a heart attack." The stock climbed into the double digits because of its strong quarter. Since Chipotle has yet to expand worldwide, there is plenty of upside.
Netflix (NFLX) reported 35% growth year after year. The stock got punished after hours by short sellers gone wild and dropped 7 points only to rally 26% on Thursday.
2. Aerospace. Boeing (BA) reported better-than-expected earnings, and although the stock is up, Cramer thinks it could "double and double" again because he sees a 7 year aerospace cycle coming. United Technologies (UTX) also rallied. Other good plays on aerospace include B.F. Goodrich (GR) and BE Aerospace (BEAV).
3. Revenue growth. "This market is willing to pay up for banks that can grow revenues," Cramer said. Citigroup (C) grew its revenues by 42% over the last quarter and doubled its securities and banking business. With over half of its business overseas, Citigroup also saw significant international revenue growth. Cramer also noted Huntington Bancshares (HBAN) and PNC Financial's (PNC) revenue growth. Although he doesn't recommend chasing HBAN further up, he thinks Citigroup is "mouthwatering" at $4.87.
4. Housing Growth. Home sales are rising and supplies are falling, setting up higher prices for homes. Standard Pacific (SPF) said 40% of its backlog in California is buying land. SPF also discussed a 4% appreciation of house prices in the Golden State. Cramer would look into any of the following plays on housing: Masco (MAS), Fortune Brands (FO), Pier 1 (PIR), Williams Sonoma (WSM), Sherwin & Williams (SHW), Home Depot (HD), Sears (SHLD), Whirlpool (WHR), TJX (TJX) and Bed Bath & Beyond (BBBY).
5. Hotels. Marriott (MAR) beat estimates by two cents a share and says business is returning sooner than it expected with the price of rooms rising and growth overseas. Starwood Hotels (HOT) reports next week, and Cramer expects good numbers. He noted that those who bought Wynn (WYNN), which he recommended ahead of the launch of its Encore casino in Macau, saw a 7% gain.
Often the market just doesn't seem to make sense, but sometimes it is possible to find the method in the market's madness. Coca-Cola (KO) beat estimates by 80 cents per share and yet the stock was down one percent on a day the S&P 500 was up. Yum Brands (YUM) had a quarterly report that was very similar to Coke's and yet the stock rose. Why such a different reaction?
The key is The Street's expectations. Yum is like a C student who got an A on his report card. When an A student like Coke reports an "A" quarter, everyone yawns. Yum's same-store sales were down 3% in the previous quarter, but this time, they rose 4%. Everyone expected Yum to disappoint in China, and it did not. Coke's volume growth in China for its previous quarter was 29%, so when it reported 6% volume growth this time, no one was impressed.
Domestically, Yum's performance was less bad than it was before, but Coke showed no real signs of improvement. Yum's same-store sales in the U.S. were down 1%, but that is a huge improvement from the 8% decline previously. Yum has hardly any competition, particularly in China, whereas Coke has Pepsi (PEP) on its back all the time.
The bottom line: Cramer says the movement of Yum's versus Coke's stocks is easy to explain after the fact, but very hard to predict. That's one reason Cramer discourages viewers from trying to game earnings season.
CEO Interview: Dan DiMicco, Nucor (NUE)
Nucor (NUE) announced a strong quarter with a 10 cents earnings beat when The Street was expecting 4 cents, and a 24% increase in sales. The long-term story for Nucor is good because it produces its own scrap metal and has more control over its raw costs. Nucor pays a dividend of 3.2% and often offers special dividends to its shareholders.
Jim noted Dan Dimicco seemed more confident than he was a year ago, and Nucor's CEO replied the company saw a 10 cent per share gain over a 60 per share loss last year, and aggressively growing utilization rates. However, Dan DiMicco didn't mince words about the state of non-residential construction;
It is actually worse than it was a year ago, Jim. It is not flying anywhere but it is more like nose diving. I think we are at the bottom but there are no signs of it picking up anytime soon.
Dan DiMIcco blamed the infrastructure problem on Washington's decision to cut the infrastructure stimulus from $800 billion to $60 billion. He also says the government is not aggressive enough in job-creating initiatives and doesn't see a sustainable recovery without a significant improvement in unemployment; "We need an excess of 23 million jobs in the next 3 to 7 years," said DiMicco.
DiMIcco says sales of sheet metal, used by the auto industry, have been strong, although DiMicco admits he is "a little cautious" about the auto sector. He ended the interview by encouraging Cramer and Mad Money viewers to wear a red shirt every Friday in honor of the men and women serving in the military.
"One thing we didn't talk about," said Cramer, "is how cheap the stock is. Join me and buy it. "
Michael Mendenhall, Hewlett Packard's (HPQ) Senior Vice President and Chief Marketing Officer
While Cramer says the first priority when picking stocks is making money, it is certainly nice to know that Hewlett Packard (HPQ) is "the greenest company in America" according to Newsweek, in addition to being a "terrific high quality tech stock."
Hewlett Packard "has a lot of recurring revenue, great brand, has been aggressively cutting costs, balance sheet is strong."
Michael Mendenhall says he believes "you can do good by doing well" and combines environmental sustainability with growth. Reducing energy consumption isn't an option, it is going to be necessary with the growth of the middle class in emerging markets, and conserving resources is essential to reducing costs and becoming more efficient.
Hewlett Packard has a special Eco Highlights label on certain goods and creates all-in-one devices that will save energy. When asked what to do about China, which is not so concerned about the environment in many of its business practices, Mendenhall says there will be mounting pressure from corporations and consumers to be environmentally friendly. Hewlett Packard has been working on reducing energy consumption by 40% for certain brands of laptops and 60% for the company as a whole.
Cramer praised Hewlett Packard for making money while remaining green.
Jim Cramer was up 31% in 2009. Click here now to trade alongside him.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.