Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday September 23.
6 Earnings to Watch in the Coming Week: Walgreen (WAG), Jabil Circuit (JBL), Paychex (PAYX), Darden (DRI), Family Dollar (FDO), Micron (MU). Other stocks mentioned: Nike (NKE), Dunkin' Donuts (DNKN), Starbucks (SBUX), CME Group (CME)
The macro news out of Europe is affecting the U.S. stock market more than fundamentals from companies, but this news can help determine what to do with stocks. Cramer outlined three things that need to happen on Monday before investors can be confident about buying stocks: 1) the French banks need to raise capital and develop a TARP-style program 2) Germany needs to outline a plan for saving the Greek economy 3) the European Central Bank should cut interest rates. At least one of these three things need to happen before any stock can have any chance of propelling higher on strong earnings. Cramer discussed earnings reports to watch:
Walgreen (WAG) has improved since the last quarter, especially in the area of prescription drugs and the layout of its stores. Cramer expects to hear good numbers.
Jabil Circuit (JBL) assembles products and tech devices. The company is a good tell on whether seasonality is turning to positive for the entire tech industry. The company has an enviable record for beating estimates and raising guidance.
Paychex (PAYX) can be a more accurate read on the employment situation than even government data.
Darden (DRI) has been a serial disappointer on raw costs and high gas prices. With a break from high prices at the pump, there could be a turn for the company soon, but in the meantime, the 3.7% dividend pays investors to wait.
Family Dollar (FDO) is a play on the squeezed middle class looking for bargains. Hedge funds might pounce on the stock if it fails to deliver.
Micron (MU) has "done nothing for a decade." While now is the time to buy semis, Micron is the exception and Cramer would stay away from this "single digit midget."
Cramer took some calls:
CME Group (CME) is in the same group as financials, which are not a buy right now. Competition and poor margins are also reasons not to buy.
Nike (NKE) is a great senior growth story that will have multiple years of strength.
Waste Management (WM)
Nothing protects investors better than a solid dividend. Waste Management yields 4.4% and has increased its payout by 80% since 2004. It is an accidental high yielder which has declined 18% because the stock is cyclical, but Cramer thinks the bears are too negative on the stock. Even if it falls another 3.5 points, the stock will yield 5%, and Cramer would buy more at that level. The company disposes of waste and builds landfills, and the latter business has very high barriers to entry because of complex zoning restrictions. While pricing was an issue in its last earnings report, which was disappointing, regional discounts were to blame, but this is a temporary problem. Most of the weakness from the last quarter is baked into the stock, and WM might be headed toward a bottom, because expectations are low. The company is cutting costs aggressively and is developing in the area of sustainable energy. A full 80% of its truck fleet next year will run on natural gas, and the company has a business that will use trash to create energy. Cramer would start a position in WM now and buy on the way down.
General Mills (GIS) has always been regarded as a quality defensive stock, but the reasons now to buy it for safety are even more compelling. Even though it doesn't have a spectacularly high dividend, at 3.1%, the company should have significant upside. General Mills was "getting killed" by rising raw costs, and while it is usually able to pass these costs on, given the popularity of its brands, it saw a 3% decline on volumes and its margins were getting squeezed. What will power the upside is the recent decline in commodity prices which, given its price increases, will mean more money to the bottom line. The company has been raising or keeping its dividend steady for 120 years, raising it by 69% in the last 6 years. While private label companies provide some competition, only 15% of its brands are exposed to private label competition. International sales comprise 20% of the company's revenues, and it is seeing strong growth in China.
Cramer took some calls:
ALPs Alerian MLP ETF (AMLP) is a great idea and a good stock to buy.
McDonald's (MCD) has a fantastic story and boosted its dividend.
Universal Display (PANL) is a stock that has risen from $20 to $50 in just six weeks on some positive headlines. Cramer would use discipline because he believes the stock has been driven too high on news alone.
Enterprise Products Partners (EPD) is not a stock to buy with calls, because when investors buy calls, they do not get the benefit of the dividend, which is the primary reason for buying MLPs.
American Tower (AMT) is going to have an amazing 2012 with its international expansion.
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