As quarterly earnings reports are being released, Jim Cramer is making calls on viewers' stocks based on these reports. On August 3's Lightning Round program, he made five bullish and two bearish calls. Some of the bullish calls are truly profitable stocks with strong upside potentials.
I have examined these picks from a fundamental perspective, and I also gave one alternative to one of his bearish calls. I have used my O-Metrix Grading System where applicable. Here, is a fundamental analysis of these stocks from Cramer's Lightning Round (Data obtained from Finviz/Morningstar and is current as of Aug.3):
|Stock Name||Ticker||Cramer's Suggestion||O-Metrix Score||My Take|
|Marathon Oil||MRO||Buy, but alternative is better||8.19||Buy|
|Health Care REIT||HCN||Buy||1.03||Neutral|
As Marathon Oil Corp. (MRO) announced disappointing quarterly results, Cramer rather prefers Carrizo Oil & Gas (CRZO), which reported solid numbers. Here is a brief comparison between these two companies:
|Current as of Aug.3 close.||Marathon Oil||Carrizo Oil & Gas|
|Forward P/E ratio||6.64||7.32|
|Estimated EPS growth for the next 5 years||8.47%||34.00%|
|Upside movement potential||49.6%||24.8%|
Marathon is trading 20.99% lower than its 52-week high, while Carrizo is trading 17.27% lower. O-Metrix score of Marathon is 8.19. Marathon had a unit spinoff recently, which caused profits to fall sharply. Carrizo, on the other hand, returned 81.5% in a year. Marathon's debt-to assets ratio is strolling around 20%, while that of Carizzo is around 50%. Average analyst recommendation is 2.30 for Marathon, and 1.80 for Carizzo (1=Buy, 5=Sell). Carrizo's insiders have been selling stocks for a while. Although it was a dreadful quarter for Marathon Oil, it is obvious that Marathon is far better than Carrizo. It has magnificent P/E- forward P/E ratios, a solid upside potential, a dividend yield, and a less volatile environment. Moreover, it is undervalued right now, and it has a five-star rating from Morningstar. I think Marathon is a much better buy than Carrizo.
Health Care REIT (HCN): Cramer believes that Health Care REIT has "cushion", and makes a bullish call on it. The company shows a trailing P/E ratio of 96.2 and a forward P/E ratio of 30.7, as of 3 of August. Analysts expect the company to have a 7.28% annualized EPS growth in the next five years. With a profit margin of 13.2%, and a dividend yield of 5.91%, Health Care is a pretty stock for dividend lovers. Target price is $55.69, which implies a 15% upside potential. The stock is currently trading 11.37% lower than its 52-week high, and it has a quite low O-Metrix score of 1.03. Earnings decreased by 56.24% this year, and 112.13% this quarter. P/S is 8.3 and PEG value is 7.1. SMA50 and SMA200 are -7.36% and -2.24%, respectively. It returned 5.2% in the last twelve months, while debts have increased more than 200% in the last five quarters. Insiders have been both selling stocks and exercising options for a long time. P/E and forward P/E ratios do not fit my criteria, and the stock needs to stabilize its EPS growths.
CenturyLink (CTL): Cramer is bearish on CenturyLink:
They are making much, much less money than they thought they were going to make. It was extremely disappointing...that was a hideous quarter. One of the worst I've seen.
The Louisiana-based telecom company was trading at a P/E ratio of 11.63, and a forward P/E ratio of 12.60, as of the Aug.3 close. Estimated annual EPS growth for the next five years is 2.81%, which sounds reasonable given the 4.75% EPS growth of past 5 years. With a profit margin of 13.08%, CenturyLink offers a superb dividend yield of 8.37%. The stock is currently trading 23.50% lower than its 52-week high. Target price is $45.62, which indicates a 31.6% increase potential. The stock returned -5.2% in the last twelve months, and its O-Metrix score is 4.60. Operating margin is 28.53%, whereas gross margin is 65.6%. Insider transactions for the last six months have increased by 74.43%. Debt-to assets ratio is nearly stable for the last five quarters. Although this downward trend is likely to continue, I believe CenturyLink can beat the market in the long run. A dip can offer opportune entry point to investors. However, I would rather go with AT&T (T), a dividend stock pick for the next 5 years (full analysis here).
IntraLinks (IL): IntraLink stock has been doing truly awfully. Since May 10, it fell from $29.99 to $14.20. As of Aug. 3, the company has a P/E ratio of -73.0, and a forward P/E ratio of 20.88. Analysts estimate an annualized EPS growth of 25.00% for the next five years. With a profit margin of -3.4%, IntraLinks offers no dividend yield. It returned 9.2% in a year. Debt-to assets ratio is having a freefall for the last four quarters, and the stock is trading 55.97% lower than its 52-week high. Target price implies 86.6% upside movement potential, while analysts give a 1.80 recommendation for the company (1=Buy, 5=Sell). Earnings increased by 96.20% this year, and 100.20% this quarter. ROA and ROE are -1.31% and -3.33%, respectively. SMA50 is -20.42%, while SMA200 is -35.77%. Cramer says that IntraLinks' quarter was "a hideous quarter that rivals CenturyLink's quarter for lack of pulchritude," and recommends waiting for now.
Apache Corp. (APA): Apache returned 21.1% in a year, and Cramer remains bullish on this stock:
It has the greatest growth profile of almost all of them. I think Apache is absolutely terrific. When oil goes down, these all go down. Let's not out think it.
Texas-based Apache, as of the Aug. 3 close, shows a trailing P/E ratio of 12.76, and a forward P/E ratio of 8.84. Analysts expect the company to have an annualized EPS growth of 10.23% in the next five years. With a profit margin of 25.94%, Apache offers a 0.51% dividend. Earnings had a whopping increase of 1072.43% this year, and 37.41% this quarter. Apache has an impressive gross margin of 98.4%, and an operating margin of 44.41%. Target price is $147.37, indicating an about 24.4% upside potential. Institiutions own 86.70% of the stock, while it is trading 11.58% lower than its 52-week high. It returned 21.6% in a year, and debt-to assets ratio is nearly stable for the last five quarters. Its O-Metrix score is 4.97. Analysts give a 1.80 rating for the company (1=Buy, 5=Sell). I guess this upward trend will continue for a while.
Johnson Controls (JCI): Johnson Controls just multiple topped, and Cramer says:
I think the quarter was fine... We want to continue to buy this stock. We think the future is better than the past... I think that is going to get better. I think JCI is a screaming buy at $36.
As of Aug.3, the stock was trading at a P/E ratio of 15.6, and a forward P/E ratio of 11.15. Estimated annual EPS growth for the next five years is 17.80%, which is reasonable when its 11.03% EPS growth of past 5 years is considered. Profit margin in 2010 was 4.3%, while the Wisconsin-based company paid a 1.76% dividend. Earnings increased by 486.05% this year. Target price implies a 32.4% upside movement potential, whereas the stock is currently trading 15.33% lower than its 52-week high. PEG value is 0.7, and P/S is 0.63. O-Metrix score of the stock is 7.31, while it returned 20.3% in a year. Debt-to assets ratio is slowly decreasing for the last five years. Insiders have been both exercising options and selling stocks for a while. Johnson Controls has had strong momentum since its dip in Mar, 2009. I believe this momentum will not fade away soon.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.