Cramer's Mad Money - Anatomy of an Earnings Beat (10/13/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday October 13.

Anatomy of an Earnings Beat: Aloca (NYSE:AA), Cummins (NYSE:CMI)

Every earnings season the same thing happens; people look forward to hearing from Alcoa as a bellwether and a sign of how the rest of earnings season is going to shape up. But what happens: "Most quarters that you view from Alcoa... you feel like a doofus for the rest of the reporting's a joke."

Having said that, Cramer thinks Alcoa's call was a good and informative one, especially concerning aluminum's end markets and it allayed concerns about the strong dollar. How did Alcoa perform so well? Cramer gave an anatomy of Alcoa's earnings beat:

Expectations were low. Analysts expected Alcoa to be down 6%, but revenues were 15% higher from last year. The company also raised the aluminum consumption growth forecast. Alcoa's secret is that its end markets are hot. Aerospace is getting ready to fly, Cummins (CMI) is buying up a lot of aluminum, and emerging market countries are consuming. Alcoa is cutting excess supply just as prices are continuing to rise. The stock has risen 10%, but Cramer noted it is 15% lower than its historic rate and he would buy the stock.

JP Morgan (NYSE:JPM), Intel (NASDAQ:INTC), Apple (NASDAQ:AAPL), CSX (NYSE:CSX), Prudential (NYSE:PRU)

Cramer thinks the bears are making much ado over Intel (INTC) and JP Morgan's (JPM) declines after they reported "fine" numbers. It is as if the bears are assuming that the market follows the pattern of these two stocks. While Intel and JP Morgan might be considered as bellwethers, Cramer noted there was no pin action following their quarters. In fact, other tech stocks performed well and Apple (AAPL) broke out over $300. Insurance companies like Prudential (PRU) performed well in spite of JP Morgan. With CSX (CSX) reporting fantastic traffic gains, can the economy really be so bad?

Celgene (NASDAQ:CELG), Dendreon (NASDAQ:DNDN), Immunogen (NASDAQ:IMGN), Exact Sciences (NASDAQ:EXAS)

While others are focusing on earnings, Cramer is keeping an eye on the biotech conferences for ideas of what new stocks to buy. Biotechs are on the way up with many names rising since Cramer rcommended them last November: Celgene (CELG) by 16%, Immunogen (IMGN), by 4%, Dendreon (DNDN), which rose 118% after release of its prostrate cancer drug, but is now up 51%. The group has taken a hit and is now even with the S&P 500, but Cramer thinks there is more opportunity.

Cramer dedicated Wednesday to drugs that treat cancer, the 2nd leading cause of death in the U.S. Emphasizing on detecting and stopping the spread of cancer, Cramer discussed Exact Sciences (EXAS), a highly speculative biotech, which is developing a non-invasive way to detect colorectal cancer, which causes the second most cancer deaths in the U.S. and yet is among the most preventable.In fact, if caught early, the survival rate can be 91%. Most patients do not want to go through the uncomfortable colonoscopy involved in detection of the disease.

The company has had an 83% run-up in the past 6 weeks. Cramer thinks the stock could more than double again, from around $8 to $20 because of the potential popularity of the tests and the fact that doctors recommend that everyone over the age of 50 should have colon tests. Cramer would buy Exact Sciences ahead of its conference on October 29.


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