Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Friday, October 21.
Friday should have been about earnings, but it was about M&A instead. There was chatter about AT&T (NYSE:T) being interested in Time Warner (NYSE:TWX). The market expects a deal announcement by Sunday. (Note: AT&T announced the Time Warner acquisition for $85.4B on Saturday and also reported its earnings early.) The focus will be on Qualcomm's (NASDAQ:QCOM) deal to buy NXP Semiconductors (NASDAQ:NXPI). However, next week is about earnings, as it is the most important weeks with big names reporting. With that, he discussed his game plan for the week.
Kimberly-Clark and VF Corp. have been a consistent performer in terms of earnings, but the market is in "what have you done for me lately?" mode. Cramer anticipates the narrative to change for VF Corp. Visa will report after the close, and Cramer will watch closely to hear what the company has to say on CEO Charlie Scharf's resignation.
Caterpillar will report with departing CEO Oberhelman presenting for the last time. The market has been kind to industrial stocks lately, but 3M seems immune to it. Cramer still anticipates pressure on the industrial stocks.
Proctor & Gamble will report, and Cramer thinks the stocks cannot rally higher unless there is more organic growth. Under Armour has not been a market darling lately, and this can change with positive earnings from the company.
The big daddy of earnings - Apple - will report after the close. Cramer expects good earnings aided by a healthy service revenue stream and consumers switching to iPhone after the Samsung (OTC:SSNLF) Note debacle. Chipotle is nearing a bottom, in Cramer's opinion. It takes a stock 18 months to come back after a health scare. Patience will be rewarded.
Cramer thinks aerospace isn't done growing. Wait to listen to Boeing's conference call to hear details before jumping to a conclusion. Coca-Cola stock has been down 2% for the year. Cramer doesn't see a positive catalyst for the stock to change its trajectory either.
Norfolk Southern's earnings will be important, as rails give you a true reading of the economy.
Alphabet might rekindle the market's interest in the company with strong earnings. Amazon is also expected to report good numbers. Cramer thinks there is no doubt that Amazon will deliver yet again.
Lastly, market expects weak numbers from Twitter, and Cramer agrees with the sentiment. It will be interesting to watch if the company can deliver an upside surprise.
Don't be quick to take action. Wait to get all the details before buying or selling a stock on the earnings report.
Both Danaher and Illinois Tool Works reported good earnings, but the stock of Danaher went up, while ITW went down 2%. How's it that two companies of the same sector are getting different response on positive results? The Mad Money host explained why the market reacted the way it did.
Danaher's stock price was up 9% YTD, while that of Illinois was up 20%. The expectations were much higher for ITW, and hence, when the earnings were good but not good enough, the market gave a negative response.
More importantly, the industrial sector is out of flavor for a long time, which has affected big names like Honeywell (NYSE:HON) and General Electric (NYSE:GE) too. Danaher broke up earlier this year, while ITW still remains a pure play industrial name, and hence, it is facing pressure like the rest of the group.
"Just because two companies in the same sector report similar results, doesn't mean the situation at both companies is the same," said Cramer.
Boston Beer (NYSE:SAM)
Boston Beer reported a disappointing quarter, but ended up 4.3% on Friday. Why did the stock rally? It had a huge short position built, and the short sellers were cashing in on the decline by booking profits. That saw the stock being re-ignited and rallying higher. This is still temporary, and Cramer is not ready to jump to a conclusion yet.
The bear case of the stock is stronger. The company's shipment volumes fell 12%, its margins shrank, it cut its full-year guidance and lost market share in the craft beer industry due to rising competition. The company has lost its growth momentum, and the stock has fallen 40% from its 52-week high.
Despite the decline, the stock trades at a hefty 24 times earnings. Cramer raised a question as to why anyone would pay for a struggling company when Constellation Brands (NYSE:STZ) is a better company available at a similar valuation. He is siding with the bears on Boston Beer.
Autozone has a long-term track record of strong earnings with more than 5,000 stores in the US. The stock is up 75% in the last three years, but 2016 has not been great, as it has gained only 2%, mainly due to disappointing earnings in the last 2 quarters.
Cramer agrees that Autozone has challenges, but the company is making adjustments to its business. It is putting a larger emphasis on commercial customers, making sure mechanics have all the parts. The company is also turning some of its stores into mega-hubs so they can act as distribution centers for nearby locations.
The average car is more than 12 years old, which makes maintenance important which is a strong case for Autozone. It also has an impressive buyback program, which adds to earnings. If the company can't report earnings growth despite all these factors, what will it do when times are good?
"Yes, I still like AutoZone the company, and the stock is inexpensive," said Cramer. It has the lowest valuation among its peers despite having best growth and management. He is a long-term believer in the stock.
Viewer calls taken by Cramer
Allergan (NYSE:AGN): Cramer's trust owns the stock. They don't expect anything near term to happen due to the election.
Will a Donald Trump victory impact food stocks? Cramer thinks neither candidate can impact global deflation, and hence, politics will have no effect on food stocks.
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