By Roger Choudhury, Lead Editor
By Roger Choudhury, Lead EditorHere, we review the Tuesday, March 15, buy and sell recommendations of Jim Cramer, host of Mad Money on CNBC. Since then, for comparison purposes, the S&P 500 (SPY) is +3.3% and the Dow (DIA) is +4.4%.
Cramer Buy Recommendations
Airgas (ARG) is up by 7.1%, since the March 15 close. In FY 2010 through March, revenues decreased by 11.16% to $3.86 billion, and non-GAAP EPS dropped by 25%. The profit margin also improved to 55.17% from 52.98%, however the EBT margin worsened to 8.13% from 9.87%. The next earnings release is on May 5, with analysts expecting between $0.84 and $0.86. In comparison, Q4 2010 produced $0.69. The packaged gas industry in the US is highly competitive, and ARG shares already trade well above our fair value estimates.
Airgas is the largest US distributor of industrial, medical, and specialty gases and hard goods, such as welding equipment and supplies. Airgas is also one of the largest US distributors of safety products, the largest US producer of nitrous oxide and dry ice, the largest liquid carbon dioxide producer in the Southeast, the fifth largest producer of atmospheric merchant gases in North America, and a leading distributor of process chemicals, refrigerants and ammonia products.
Peabody Energy (BTU) is +2.0%, since the March 15 close. In 2010, GAAP EPS is +71.69% to $2.85, after -52.71%. Revenues went up by 14.10% to $6.86 billion, after -8.81% in 2009. The EBT margin improved to 16.23% from 10.84%. In 2011, analysts expect non-GAAP EPS to be between $3.48 and $6.02. In 2010, non-GAAP EPS was $3.05. The next earnings release is on April 19, with analysts expecting between $0.46 and $0.73. In comparison, Q1 2010 produced $0.52 for non-GAAP EPS. BTU shares also trade with a P/S multiple of 2.6. From 2004 to 2010, those multiples were 1.4, 2.4, 2.1, 3.6, 0.9, 2.0, and 2.5, respectively. Double digit revenue growth and EPS doubling should raise multiples to near 3.0x. The company also has a debt to equity ratio of 0.58. This is an established company, and we believe that it ought to be a part of your portfolio, if you seek to shed some risk. BTU shares trade slightly above our fair value estimate, and we believe it will outperform the market.
Peabody Energy is the world’s largest private-sector coal company and a global leader in clean coal solutions. Peabody fuels 10% of US power and 2 % of worldwide electricity.
Continental Resources (CLR) is up by 5.5%, since the March 15 close. In 2010, revenues grew by 33.99% to $839 million, and GAAP EPS shot up by 135.71% to $0.99. The profit margin improved to 77.60% from 76.11% and the EBT margin expanded to 30.80% from 17.57%. The company also has a debt to equity ratio of 0.77. The next earnings release is on May 2, with analysts expecting non-GAAP EPS between $0.44 and $0.61 and revenues between $299.2 million and $337.61 million. In comparison, Q1 2010 produced $0.43 and $248.268 million, respectively. Given higher oil and gas prices, we recommend CLR for our readers. However, keep your portfolio diversified. If you already have oil and gas stocks, avoid this. This is a good opportunity for one looking to add oil and gas exposure.
The company is an independent oil and natural gas exploration and production company. It is now the third largest crude oil producer in the Rocky Mountain region, the largest leaseholder and driller in the Bakken Shale and the largest leaseholder in the Anadarko Woodford in Oklahoma, with additional operations in the South and East regions of the US. The company’s exploration activities in large new or developing plays provide the opportunity to acquire undeveloped acreage positions for future drilling operations.
Caterpillar (CAT) is +8.2%, since the March 15 close. In 2010, GAAP EPS jumped by 190.21% to $4.15, after falling by 74.74%. Revenues grew by 31.46% to $42.58 billion, after dropping by 36.88% in 2009. The EBT margin also improved to 8.81% from 1.76%. In 2011, analysts expect non-GAAP EPS to be between $5.49 and $6.90. In 2010, the actual non-GAAP EPS was $4.15. The next earnings release is on April 29, with the Street forecasting between $0.97 and $1.52. In comparison, Q1 2010 produced $0.36. CAT shares trade with a price to sales multiple of 1.7. This is the high multiple, if looking at the period from 2001 to 2010. These shares should be trading 1.5 times sales. The company also has a debt to equity ratio of 1.89. The company is aiming for $8.00 to $12.00 in non-GAAP EPS in 2012, and we believe that it will get there.
Ford (F) is up by 1.3%, since the March 15 close. In 2010, revenues grew by 9% to $128.95 billion, and the EBT margin improved to 5.54% from 2.56%. GAAP EPS increased by 93.02% to $1.66. In 2011, analysts expect non-GAAP EPS to be between $1.15 and $2.25, or a decrease between 39.7% and an increase of 17.8% from $1.91 in 2010. Revenue estimates range between $117.6 billion and $132.3 billion. The next earnings release is on April 25, when analysts expect between $0.28 and $0.60, or between a decrease of 39.1% and an increase of 30.4%. In comparison, Q1 2010 produced $0.46 for non-GAAP EPS. Ford shares trade with a price to sales multiple of 0.5. This is the highest multiple between 2001 and 2010. So, investors have high expectations on Ford. If the company can demonstrate upper single digit growth in EPS and in revenues, this multiple is justified. The company also has $103.98 billion in long term debt ($19.26 billion for the automotive sector and $85.112 billion for the financial services sector). Ford trades at a significant discount to our fair value estimate. Interested buyers should look at taking a position in shares now.
Joy Global (JOYG) is up by 7.1%, since the March 15 close. In FY 2010 through October, GAAP EPS dropped slightly by 0.23% to $4.40, after expanding by 27.83% in FY 2009. Revenues also fell by 2.06%, after +5.25% in 2009. On the bright side, the EBT margin improved to 19.27% in FY 2010 from 18.97% in FY 2009. For FY 2011, analysts expect non-GAAP EPS to be between $5.19 and $5.83, after producing $4.40 in non-GAAP EPS in FY 2010. Q1 2011 already showed $0.96, which was an improvement from $0.73 in Q1 2010. The next earnings release is on June 2, when analysts forecast non-GAAP EPS to be between $1.29 and $1.50. In comparison, Q2 2010 posted $1.15. JOYG shares trade with a P/S multiple of 2.8. This level is the highest since the 2005-06 era, when EPS had triple digit percentage increases and revenues grew 20-35%. This company also has a debt to equity ratio of 0.26. Skim the company outlook, here.
We agree with Cramer on this, and expect growing demand from emerging markets. Joy Global is a worldwide leader in manufacturing, servicing and distributing equipment for surface mining through P&H Mining Equipment and underground mining through Joy Mining Machinery.
Xilinx (XLNX) is slightly down by 0.1%, since the March 15 close. In FY 2010 through March, revenues grew by 0.46% to $1.83 billion, but GAAP EPS dropped by 5.15% to $1.29. The profit margin remained steady at 63.36%, but the EBT margin fell to 23% from 27.30% in FY 2009. Through the first 3 quarters of FY 2011, non-GAAP EPS came in at $1.81, compared with $0.75 for the same period in FY 2010. The next earnings release is on April 27, with analysts expecting between $0.49 and $0.55 in non-GAAP EPS. In comparison, Q4 2010 produced $0.58. We expect the company to continue to make inroads in the programmable logic device chip space, and place a buy on XLNX shares. Xilinx is the world's leading provider of programmable platforms.
Cramer Sell Recommendations
Community Bank System (CBU) is up by 3.6%, since the March 15 close. Revenues grew by 8.61% to $270 million, and GAAP EPS shot up by 50% to $1.89. The next earnings release is on April 26, with analysts expecting non-GAAP EPS to be between $0.45 and $0.49. In comparison, Q1 2010 produced $0.42. We expect the company to post earnings above $0.48. CBU shares trade below our fair value estimate, and we believe that they have plenty of upside. The company is also a prime takeover or merger target. Buy CBU for the long run.
Headquartered in DeWitt, NY, Community Bank System has $6.3 billion in assets and approximately 170 customer facilities across Upstate NY, where it operates as Community Bank, and Northeastern PA, where it is known as First Liberty Bank & Trust. Its other subsidiaries include: Benefit Plans Administrative Services, an employee benefits administration and consulting firm with offices in Upstate NY, Pittsburgh and Philadelphia, PA and Houston, TX; the CBNA Insurance Agency, with offices in four northern NY, communities; Community Investment Services, a broker-dealer delivering financial products throughout the company’s branch network; and Nottingham Advisors, a wealth management and advisory firm with offices in Buffalo, NY, and North Palm Beach, FL.
On April 11, the company announced that it completed its merger with The Wilber Corporation, and its banking subsidiary, Wilber National Bank, a $870 million commercial bank with 22 banking offices serving the Central Region of Upstate NY.
Stillwater Mining (SWC) is +5.9%, since the March 15 close. In 2010, the company grew revenues by 40.93% to $556 million, and GAAP EPS returned to positive territory to $0.51 from -$0.10. The profit margin nearly doubled to 16.30% from 8.28%. The company also reported its highest earnings in a decade in 2010 ($50.4 million). The next earnings release is on May 2, with the consensus analyst estimate at $0.37. In comparison, the company produced $0.14 for non-GAAP EPS in Q1 2010. Palladium prices remain at high levels, and we expect production growth of 2%. This signals to us that SWC shares are undervalued, and should be a buy for those looking to diversify their mining holdings. SWC should outperform the general market.
Stillwater Mining Company is one of the world’s leading producers of platinum group metals and the only significant primary producer of palladium in the Western Hemisphere. The company’s 28-mile long JM Reef in Montana is the highest grade ore body containing platinum group metals. View the latest company presentation here.
Tibco Software (TIBX) is up by 12.7%, since the March 15 close. In FY 2010 through November, the company expanded revenues by 21.34% to $754 million, and GAAP EPS grew by 27.78% to $0.46. The EBT margin held steady at 14.70% from 14.42% in 2009, but is still improved from 10.99% in 2009. Q1 2011 produced EPS of $0.16, which was higher than Q1 2010’s $0.12. The next earnings release is on June 20, with analysts expecting between $0.18 and $0.21. In comparison, Q2 2010 produced $0.15. Tibco faces fierce competition from IBM, and we believe these shares will underperform the general market.
The company is a provider of infrastructure software for companies to use on-premise or as part of cloud computing environments. TIBCO says it provides companies the two-second advantage™ – the ability to capture the right information at the right time and act on it preemptively for a competitive advantage. More than 4,000 customers worldwide rely on TIBCO to manage information, decisions, processes and applications in real time.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.