By Larry Gellar
Here are five stocks picked by CNBC’s Jim Cramer to rise about a month ago. Anheuser-Busch InBev (BUD) is the only one to go up, although the market as a whole has fallen since these recommendations. Chipotle (CMG), Deere (DE), Johnson Controls (JCI), and AT&T (T) have been less fortunate than A-B. AT&T in particular is feeling the sting of potentially having to forfeit its merger with T-Mobile. Let’s see what specifically has been happening with these 5 stocks:
Anheuser-Busch InBev – Recommended at $57.48; now trading at $57.96. A-B continues to be innovative with its beer products, seeing as the company just released a tap draft system for homes. Although the product is only avaolable at some retailers in St. Louis, this could be a big hit for consumers who prefer the tap to bottles, cans, or kegs. Meanwhile, A-B is having a bit of trouble in Illinois. The company owns part of City Beverage, which is based in Chicago, but now the Illinois Liquor Control Commission is investigating the possibility that the businesses should be separated. Another piece of news to consider for A-B is its renewed partnership with the NBA. Budweiser will continue to be the league’s official beer, meaning that Budweiser will be featured throughout NBA games and the NBA will be featured in Budweiser’s own marketing. Important competitors for A-B are Heineken (HINKY.PK) and SABMiller (SBMRY.PK). A-B’s price to earnings and price to sales ratios are in the middle of those two other stocks. Margins-wise, A-B is pretty strong, with gross margin at 56.5% and operating margin at 30.87%. As for cash flows, $836 million came in during 2010 and $68 million flowed out during the first half of 2011.
Chipotle Mexican Grill – Recommended at $327.46; now trading at $317.47. As discussed here, there are plenty of reasons to like this stock, even more so because of its newly reduced price. The company has shown consistent growth, and management does a great job of keeping the brand valuable. Chipotle also has a new venture called Shophouse Southeast Asian Kitchen that many investors are excited about. The name says it all, but the location that just opened up in Washington, D.C. has gotten rave reviews. On the other hand, the bear side of the Chipotle story can be found here. The argument there is mostly based on Chipotle’s high multiples, which is certainly worth thinking about. In fact, price to earnings, price/earnings to growth, and price to sales ratios are all about twice as high as Yum Brands (YUM). Gross margin of 36.92% and 15.64% are certainly impressive for Chipotle is certainly impressive, however. As for cash flows, $5 million came in during 2010 and $185 million came in during the first 9 months of 2011. Operating cash flows have improved, and outflows due to investing and financing have decreased. Two more important statistics to consider for Chipotle are 24.1% quarterly revenue growth and beta of 0.71.
Deere & Company – Recommended at $76.33; now trading at $73.90. Many investors value Deere as a dividend stock, and some great information about the company’s dividend can be found here. Specifically, Deere’s dividend is very safe and should continue to grow. Investors are also impressed with Deere’s recent earnings report. Sales grew significantly, and equipment sales in particular did quite well. Additionally, the Construction & Forestry division has been one of Deere’s highest-performing segments. Certain global trends are also working in Deere’s favor. The company is having tremendous success in the emerging markets, and even products here in the United States are in high demand. Important competitors for Deere include Caterpillar (CAT) and CNH Global (CNH). Deere’s price to earnings and price to sales ratios fall in between Caterpillar and CNH, although Deere has the best margins – those numbers are 29.16% gross and 13.19% operating. As for cash flows, $143 million flowed out during fiscal year 2011. That was mostly due to outflows from investing activities, and cash flows from operating activities saw a turnaround during the fiscal year. Meanwhile, investors should note that John Deere Capital Corp is selling a large set of new notes. In fact, $500 million of 5-year notes and $600 million of 3-year notes were just released.
Johnson Controls – Recommended at $31.53; now trading at $29.16. Johnson Controls just put out a bunch of new notes for general corporate purposes as well as paying some other short-term debt. $400 million worth of notes will mature in 2016, $450 million worth will mature in 2021, and $250 million worth will mature in 2041. Also financial news for the company is its recent dividend increase, which has been fueled by its sales growth. Additionally, Johnson Controls is pretty optimistic going forward because global car production appears to be increasing. One area that Johnson Controls is particularly dominant in is energy-efficient technology. More details can be found here, and the company is using a wide variety of renewable energy sources for its products. Important competitors for Johnson Controls include Exide Technologies (XIDE) and Magna International (MGA). Those stocks have higher price/earnings to growth ratios, while Johnson Controls has the highest price to sales ratio. Margins for Johnson Controls are about average – those numbers are 15.11% and 4.87%. As for cash flows, $303 million flowed out during fiscal year 2011, mostly caused by the company’s investing activities. Both operating and financing cash flows were positive, however.
AT&T – Recommended at $29.25; now trading at $28.84. AT&T recently announced their continued support of the Special Olympics, and this could help the company open up new markets. Here’s what Jennifer Jones, one of the company’s vice presidents, had to say: “We look forward to continuing to support the organization's mission by developing new technologies and expanding our accessibility solutions to make life easier for individuals with intellectual disabilities.” In fact, AT&T will donate $60 to the Special Olympics every time that purchases of certain products are made here. On the other hand, some analysts are worried about AT&T’s future, as the prospects of an AT&T-T-Mobile merger are beginning to look dim. For the time being, court hearings are being delayed while AT&T scrambles to find new ways to make the deal acceptable to regulatory authorities. Kevin Smithen of Macquarie USA downgraded the stock to Underperform, noting that Verizon’s (VZ) spectrum situation is much better off. Investors should note that while Verizon has the highest price to earnings ratio, price/earnings to growth and price to sales ratios are higher for AT&T. Meanwhile, AT&T’s margins are a bit lower than Verizon’s – those numbers for AT&T are 57.22% gross and 16.16% operating.