Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday April 24.
9 Unsung American Industrial Heroes: 3M (MMM), IBM (IBM), AT&T (T), Honeywell (HON), Eaton (ETN), United Technologies (UTX), Dupont (DD), PPG Industries (PPG), General Electric (GE). Other stocks mentioned: Apple (AAPL), Facebook (FB), Goodrich (GR)
Everyone is talking about Apple's (AAPL) earnings, which were a "ridiculous blowout" of analysts' estimates. Apple reported $39.2 billion in sales, when The Street was predicting just $36 billion. Prior to the quarter, an "errant analyst" posited that Apple had sold only 28-30 million iPhones, and the stock dipped until the truth came out that the company's iPhone sales were 35 million. In spite of iPad supply constraints, Apple still sold 11.8 million, up 151% over last year. Gross margins were up 47%, exceeding predictions of 43%. Cramer emphasized that Apple is an investment, and not a trade; "Shame on you if you keep trading it," he exclaimed.
With much ado about Apple, some have been led to believe that the only thing America produces well are iPads and iPhones, but Cramer devoted a segment to the "unsung heroes" of this earnings season, old-fashioned American manufacturers and industrials that are taking market share, selling their goods and paying down debt:
3M (MMM) has remained on top in spite of challenges in Europe and China. The company reported strong profit and growth.
IBM (IBM) saw an "obsessive" decline after its earnings, but raised its dividend by 13% and announced a significant buyback of $7 billion that will boost its earnings.
AT&T (T) has a terrific 5% dividend with strong sales in all of its divisions.
Honeywell (HON) is thriving in the aerospace bull market.
Eaton (ETN) has raised guidance twice this year and should continue to perform.
Dupont (DD) has moved into a multitude of secular trends, including healthcare, alternative energy and food production. Many thought DD had lost its way, but now it is a "go-to" company everyone should own.
PPG Industries (PPG) offers a bigger dividend each year with record profit and great sales.
General Electric (GE) reported earnings during a glum period, but growth is back and the company has boosted its dividend. Its once-troubled finance segment is seeing a turnaround.
Cramer took a call:
Facebook (FB) had better be priced right for its IPO. A failed Facebook IPO would "destroy this market."
Ethan Allen (ETH) is benefiting from the comeback in housing, but its stock price still needs to play "catch up" with the rest of the sector. After pre-announcing to the downside, ETH surpassed earnings estimates by 1 cent on a 8% revenue beat. CEO Farooq Kathwari discussed the doubling of the company's earnings per share and how ETH has made a comeback; "During the recession, we began everything from base zero." The company is spending a significant amount on opening new showrooms, hiring its own interior designers and marketing, while still boosting the dividend 29%; "We are changing over 60% of our product program." The company is expanding into China with 70 locations and is building a new factory in Honduras, because production of goods in Southeast Asia was becoming more expensive and less efficient. ETH's factory in Mexico has been a boon, although much of its merchandise is produced in America. When asked how the company can avoid the fate of Wal-Mart (WMT), which is being investigated on allegations that executives took bribes from Mexican officials, Kathwari responded, "We would rather be small than get involved in something that is not right."
Cramer thinks ETH's investment in its business will pay off; "The future looks brighter than the past" for ETH.
Coca-Cola (KO) reported last week what appeared to be a decent quarter, with a 1 cent earnings beat and revenues up by the single digits. However, after looking deeper into the company's conference call, Cramer concluded the quarter was a "blowout" thing of beauty quarter. While the results didn't seem spectacular at first glance, KO had some formidable challenges: weakness in Europe, high raw costs, rising fuel prices and currency pressures. In spite of that, KO posted volume growth in every region, with Europe flat, but not down. The key metric for KO was volume growth, and in the U.S. this was at 2%, and at 6% overseas, where it has 80% exposure. Its non-cola drinks saw impressive growth, with energy drinks up 25% and bottled water sales rising into the double digits. Gross margins were in-line at 60.7%. KO will benefit from the decline in raw costs: aluminum is 13% cheaper, natural gas has declined 37% and corn prices are down 2%.
Pepsi (PEP), KO's main competitor in the "cola wars" recently slashed guidance and announced a major restructuring, which will prevent it from taking significant market share from KO. With a multiple of 16.5, KO is cheap; if it traded at the high-end of its historic range of 23 times earnings, the stock would be priced at $103. While Cramer doesn't think KO will reach this target in the very near future, it is bound to improve, since the challenges the company cited are easing, especially raw costs. Cramer would buy KO at its current level, or would look for a possible pullback if PEP says some tough things about the industry on its earnings report, and sends KO down along with it.
Cramer took some calls:
Beam (BEAM) is making smart acquisitions, and there is talk that Beam might be taken over. Cramer would buy Beam for its growth and not as a speculation on a possible takeover.
B&G Foods (BGS) was not as bullish on their recent call as management has been in the past. However, the quarter was consistent and BGS has a solid yield of 5%. Cramer still likes BGS.
Cramer discussed the "measured move" theory or what technician Carolyn Boroden of FibonacciQueen.com calls "symmetry." The idea is that stocks that have moved in either direction tend to move the same amount each time. While this may sound simplistic, it has frequently been shown as an accurate way of measuring a move and calling a top or a bottom in a stock. For instance, Boroden found that IBM's (IBM) moves tend to be in the $16 to $18.20 range. Therefore, if IBM falls in the $192-$196 range, after its recent decline, it might be time to buy. On Tuesday, IBM dipped to 196.70, and tested its support line. Cramer thinks IBM might have hit a bottom, and has great fundamentals.
Conoco-Phillips (COP), which is creating value by splitting up the company, has a floor of support at $70-$71, according to the symmetry theory. COP is currently just 50 cents above that level. Boroden thinks that if COP starts to rise, it could hit $80. Bed Bath and Beyond (BBBY) is also just 50 cents above its bottom at around $65-$66, and might be a buy. Cramer thinks BBBY is also a buy on its solid fundamentals.
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