Cramer's Mad Money - A Big Kahuna Earnings Week (10/15/10)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday October 15.

A Big Kahuna Earnings Week: Apple (NASDAQ:AAPL), Verizon (NYSE:VZ), Cirrus Logic (NASDAQ:CRUS), EMC (EMC), IBM (NYSE:IBM), Yahoo (NASDAQ:YHOO), Chipotle Mexican Grill (NYSE:CMG), Citigroup (NYSE:C), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), Caterpillar (NYSE:CAT), Bucyrus (NASDAQ:BUCY), Boeing (NYSE:BA), Honeywell (NYSE:HON), Schlumberger (NYSE:SLB), Freeport McMoRan (NYSE:FCX)

The upcoming week is a "big kahuna" week for earnings, and rather than trading impulsively on results and headlines, the best game plan is to listen and process information from companies. Apple (AAPL) reports on Monday following a great week when the stock surpassed $300 on news Verizon (VZ) would carry the iPhone. Cramer wants to hear if the estimates for iPhones sold will exceed 10 million. Cramer reiterated his price target of $325 for Apple and noted when he recommended it on September 12, the stock was at a mere $268.

Cirrus Logic (CRUS), a major supplier to Apple, should indicate on Thursday whether or not it is worried about losing business from the tech giant. EMC (EMC) should give useful information on the future of cloud computing when it reports on Monday, and Cramer wants to know from IBM's (IBM) report on the same day if it is headed to $200. He also wants to hear from IBM how companies are increasing their IT spending.

On Tuesday, Yahoo (YHOO) should discuss whether the takeover rumors last week were for real or if they were just talk. Chipotle (CMG), the "best restaurant growth story out there" reports Thursday, and should talk about the growing trend in healthy eating. Cramer wants to see same store sales growth of at least 8%; if it is 10%, he predicts the stock breaks $200.

Bank stocks have been hit with bad news about foreclosures and allegations of improper loan reviews. However, Cramer is looking for good numbers from Citigroup (C) on Monday, Bank of America (BAC) on Tuesday and Wells Fargo (WFC) on Wednesday. He expects to hear that Citigroup is now 50% international. However, it is worth it just to sit and listen to these calls, because as long as the negative headlines persist, these stocks are going lower. It is also worth paying attention to news about housing next week, including housing starts and mortgage application numbers.

Industrials Caterpillar (CAT), Bucyrus (BUCY) and Freeport McMoRan (FCX) report this coming week, and on the latter's report on Thursday, Cramer wants to know if Chinese copper demand has finally reached 40%. Boeing (BA) reports on Wednesday and Honeywell (HON) reports on Friday; these companies should be talking about the "quality" problem of too much demand.

Schlumberger (SLB) on Friday should give a full picture of the oil industry in general.

Inspire Pharmaceuticals (NASDAQ:ISPH), Allergan (NYSE:AGN)

When looking for a takeover target, sometimes it is a better idea to look at the potential buyer than at the potential target. For instance, Allergan (AGN) says it wants to make more acquisitions. What could Allergan be looking for? Cramer thinks the perfect purchase could be Inspire Pharmaceuticals (ISPH), which already has a deal with Allergan for its eye treatment. Allergan could buy Inspire for just a couple billion, and the rights to Restasis, its largest revenue producer and its pink eye treatment AzaSite. Allergan made a royalty agreement with Inspire for rights to Restatis in August, and Inspire's shares have roared from $4.50 to $6.70. Buying Inspire could save Allergan the trouble of renewing its royalty agreement.

Even if Allergan won't buy Inspire, the company has a heart business and a cystic fibrosis treatment which is listed as one of the top biopharma products to watch in 2011. Inspire is planning to submit the application to the FDA in the latter half of 2011 for what could be a $300 to $500 million drug. As with any other speculative stock, Cramer urged viewers to do homework before buying and to use limit orders.

Teva (NASDAQ:TEVA), Novartis (NYSE:NVS), Biogen Idec (NASDAQ:BIIB)

Cramer discussed the best way to play MS treatments. Since multiple sclerosis is a disease for which there is no cure yet, patients who require treatments provide significant recurring revenues. Novartis (NVS) has made news by developing the first oral medication for MS. As of yet, there is no real pure play on MS treatments: Biogen Idec (BIIB) is the closest with two MS treatments creating 70% of the company's revenues, but Cramer thinks Biogen is too vulnerable to competition on the horizon to make it a buy. Novartis' Gilyena poses the greatest threat to Biogen, but since Novartis is such a huge company, it seems unlikely the drug will create a significant upside for Novartis.

Cramer's MS pick is Teva Pharmaceuticals (TEVA). While this company has earned its reputation as a great play on generics, 30% of Teva's revenue comes from branded products, of which its MS treatment, Copaxo, is the leading MS drug in the world, generating $3 billion. While Novartis' new treatment is convenient, Copaxo has higher efficacy rates than other medications and fewer side effects. Cramer thinks it is unlikely those who take Copaxo will want to switch to Novartis' new drug. Teva's stock was savaged this summer until it finally turned around at $45. Copaxo is not due to lose its patent until 2014, and with Teva creating new versions of the drug, the company is keeping ahead of the competition. While the stock is up from its 52 week high, Cramer thinks the stock has excellent risk/reward, especially since it is expected to report a 14% growth rate when it reports in November.

CEO Interview: Michael Mendes, Diamond Foods (NASDAQ:DMND)

Diamond Foods (DMND) has been on the way up, rising 75% since December 2008 when Cramer recommended it. However, the stock fell 11% in one day when the headlines reported disappointing guidance, even though the company beat earnings by 6 cents. However, the 58-62 cents guidance was a far cry from the 92 cents The Street was expecting. However, this is a good example of the value of looking behind the headlines. Management took advantage of the drop in stock price to repurchase shares.

The company's brands are thriving, including its newly acquired Kettle Potato chips, Pop Secret popcorn, and Emerald nuts with record-taking market share. Michael Mendes says he thinks there was too much negativity over guidance and is optimistic about the company's future after the acquisition of Kettle Chips. Diamond is planning to develop new brands, including a healthier type of tortilla chips and healthy microwave popcorn that pops up blue. Diamond is preparing a multi-brand promotion for the Superbowl. Cramer thinks Diamond's stock is going higher.


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