Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday July 29.
A Pause That Depresses: Windstream (NASDAQ:WIN), CenturyLink (NYSE:CTL), Frontier Communications (NYSE:FTR), Gilead (NASDAQ:GILD), Merck (NYSE:MRK), Amgen (NASDAQ:AMGN), Twitter (NYSE:TWTR), Ford (NYSE:F), Schlumberger (NYSE:SLB), Aetna (NYSE:AET), Cummins (NYSE:CMI), Deere (NYSE:DE), Monsanto (NYSE:MON). Other stocks discussed: Melco Crown Entertainment (NASDAQ:MPEL), Wynn Resorts (NASDAQ:WYNN), Staples (NASDAQ:SPLS), MGM Resorts (NYSE:MGM)
The averages turned tail after an initial positive showing, closing the day down 70 points. Windstream (WIN) might get permission to become a REIT. Centurylink (CTL) and Frontier (FTR) might follow in Windstream's footsteps.
Many companies have impressed this earnings season, but Cramer is concerned about the underlying strength of the market. There are some bright spots with activist investors, drug companies are performing well, including good news from Gilead (GILD), Merck (MRK) and Amgen (AGMN). Some areas of tech are strong; Twitter (TWTR) announced a good quarter. However, there are some tailwinds that may turn into headwinds. Housing is still a troubled area and has an impact on the larger economy. There is a cooling in every aspect of the housing sector. Home-oriented retailers are not strong, and Case Shiller numbers signal a decline. Home prices are still too high.
Aerospace has been strong this year until now, with downgrades that are "sticking." Most of these companies are delivering quarters that are disappointing, at least to some degree. Even airlines are stalling. The auto cycle might be running out of gas, and there might be too much supply. Ford (F) reported a good quarter, but the stock is not moving. Oil prices are high, and drilling is booming, but the stocks have not behaved well since Schlumberger (SLB) failed to hit the high end of the estimates. Banks are falling again because interest rates are low. Aetna (AET) got hammered, even though it reported decent numbers. The truck cycle was picking up, but Cummins (CMI) reported a number that seemed promising, but was not so hot. Deere (DE) and Monsanto (MON) have also been weak. UPS (NYSE:UPS) sent shivers down the spines of people who felt commerce was picking up.
Many of these cycles might just be pausing, but the problem is that there are too many cycles pausing all at once.
Cramer took some calls:
Melco Crown Entertainment (MPEL): The turnaround in casinos is based on Las Vegas, and MPEL doesn't have enough exposure to Sin City. MGM Resorts (MGM) is a better bet and Wynn Resorts (WYNN) is also good.
Staples (SPLS): "I'm not a fan of Staples."
CEO Interview: David Steiner, Waste Management (NYSE:WM)
Waste Management (WM) beat earnings by a penny and gave guidance that was strong. Cramer says WM is "taking control of its own destiny," and it rallied 3.9% after earnings. CEO David Steiner discussed the sale of Wheelabrator for $1.94 billion, and the company will use the proceeds to create value for shareholders. Steiner said the company is going to concentrate on becoming a stellar service provider and improving its volumes. WM will benefit from the comeback of housing, and Steiner says he is seeing an improvement in building in Texas and Florida.
Steiner discussed the high tax rate of over 44%; "We pay more than our fair share," but Steiner said he is committed to continue to invest in the United States. Tax reform is needed, he said, to make this possible. WM runs its fleet on natural gas, which is not only good for the environment, but saves money. WM also has built natural gas fueling stations and said that the recycling business is strong. Cramer said the stock is not done going up.
El Pollo Loco (NASDAQ:LOCO) and GoPro (NASDAQ:GPRO). Other stocks mentioned: Chipotle Mexican Grill (NYSE:CMG), Control4 Corporation (NASDAQ:CTRL), Zulily (NASDAQ:ZU), Amazon (NASDAQ:AMZN), Sirius XM Holdings (NASDAQ:SIRI)
El Pollo Loco (LOCO) exploded 43% higher on Monday and rallied 60% on Friday on its IPO, but gave up some gains on Tuesday. Will the crazy chicken run higher? GoPro (GPRO) jumped 32% on its first day of trading and then had a multi-day run. LOCO was a sliver deal with few shares offered, which is one reason the stock moved so high on its first day, but it has a strong underlying story.
LOCO has a regional to national strategy and its same store sales have been running in the high single digits. The company's emphasis is on the authenticity of its cuisine, and is paying down its debt. LOCO is a speculative stock, and it has the makings of "the next Chipotle (CMG)." Cramer thinks it was underpriced on the IPO with too few shares offered; it jumped because of these factors, and is not necessarily overvalued.
Cramer took some calls:
Control (CTRL) has been brought down by the decline in home sales; "That concerns me," said Cramer.
Sirius XM Radio (SIRI): Cramer would stay the course. It is a long-term buy.
CEO Interview: John Faraci, International Paper (NYSE:IP)
International Paper (IP) reported what the market is treating as a mixed quarter, with an 11 cent earnings beat, but revenues that dropped 1.7% yoy. The stock dropped, but Cramer thinks that is because the stock ran into the quarter. IP has given investors a 168% gain since Cramer recommended it in 2009. CEO John Faraci said that becoming MLP would be "complicated" and is not inconceivable, but probably will not be happening in the near future. However, he added "we would look at it very carefully," if it seems the best move for shareholders.
The food service business is producing record revenues. The rejection of foam for packaging has been a boon to IP. Demand has been "choppy," said the CEO; the box business is improving, but is doing so slowly. IP has a significant Russian business, but at this point it has had "no impact on our operations," but "we are watching the situation carefully." Emerging markets are slowing, but the developed economies are consistent. Input costs have risen, especially in wood, "but we can compete ... We reported the best 2nd quarter in 10 years," said Faraci.
CEO Interview: Martin Richenhagen, Agco (NYSE:AGCO)
Agco (AGCO) delivered an 8 cent earnings beat, but with less than expected revenues and lowered guidance. The stock declined, and Cramer wondered if it will go lower. He asked CEO Martin Richenhagen if the agriculture cycle might be paused or is running out of steam. The CEO says the fundamentals are very strong, but the industry is paused, partially because of lower commodity prices and because farmers have already invested in previous years and quarters.
Certain countries are showing instability as well. North America was weak because of corn and other factors. England, Spain and Scandinavia are coming back, but Germany and France are slow. Brazil is doing not as badly as expected, but political instability is keeping it from making a comeback. Argentina is doing poorly. The Ukraine actually was doing well for Agco, but Russia is already slow, and that is before proposed sanctions. The company is buying back stock, and Richenhagen admitted that he is looking at the future with caution.
Get Cramer's Picks by email - it's free and takes only a few seconds to sign up.