Cramer's Mad Money - The Best Quarter In This Earnings Season So Far (5/7/12)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday May 7.

CEO Interview: Irwin Simon, Hain Celestial (NASDAQ:HAIN)

Cramer declared that Hain Celestial's (HAIN) quarter was the "best quarter in earnings season so far." Last Thursday, the company reported a 4 cent earnings beat with revenues up 31.5%. Earnings growth accelerated from 7% to 9%. Even though Hain had run up 29% into the quarter from the beginning of the year, the stock did not drop after earnings, but rose an additional 6%. Hain's shares have seen a 184% gain since Cramer got behind it two years ago, and a 23% rise since CEO Irwin Simon appeared on Mad Money in February. The stock is not cheap, with a multiple of 24 and a 10% long-term growth rate, but Cramer thinks the latter number is too conservative. In spite of the warm weather, soup sales were up 12%, and although the birthrate in the U.S. has slowed, Earth's Best Baby Food sales rose by double digits. Greek Gods Yogurt sales grew an astounding 60%. Hain's tea sales have risen 11%, with the sales of the Sleepytime brand growing 20%. When Cramer pointed out a common misconception that organic and healthy food is only for rich people, Irwin Simon responded that the numbers would not be so strong if healthy eating was just "for the 1%." Cramer is bullish on Hain.

Not So Hot Commodities. Stocks mentioned: Procter & Gamble (NYSE:PG), Cummins (NYSE:CMI), Wal-Mart (NYSE:WMT), Vertex (NASDAQ:VRTX)

Commodities are the name of the stock picking game these days. With slowing growth in Latin America, China and Europe, the demand for commodities is falling, and that is bad for companies levered to commodities and good for companies that have to struggle with high raw costs. One litmus test to use before picking a stock in this environment is to ask: "Is this company involved with producing commodities or using commodities?" The stocks of commodity producers are falling, and the stocks of retailers, restaurants and producers of packaged goods are rising. Wal-Mart (WMT) is plagued by an investigation into ethical violations, and yet the stock rose 50 cents with news of falling oil prices. Procter & Gamble (PG) reported a terrible quarter, has been hit with downgrades and was the target of a negative comment by Warren Buffett, yet the stock has only dropped a few cents, because it is benefiting from lower raw costs. Cummins (CMI) reported a blowout quarter, and is being hurt by dropping demand for commodities.

Commodities are moving stocks, but currently, these commodities are not so hot.

Cramer took a call:

Vertex (VRTX) has a drug for cystic fibrosis that is expected to be revolutionary in the treatment of the disease. Cramer thinks the drug will be a monopoly, and even though shares of VRTX have risen 20 points, there is more room to run.

AIG's (NYSE:AIG) Sweet Deal

Over the weekend, the government sold a good portion of its stake in AIG (AIG), 5 billion shares, of which the company bought back 2 billion. Very few investors could get in on the secondary offering, since it was hammered out so quickly, but Cramer thinks the deal was like a giant neon sign that says "Buy, buy, buy AIG." The fact that the government allowed AIG to buy back 45% of its shares shows that it has confidence in the company, and the fact that management bought back the stock is a sign that it feels ready to hit its target of 10% revenue growth. AIG is now a leaner, meaner company than it was when it was a ward of the state three years ago, hobbled with $182 billion worth of bailouts. It is now a simpler company, focused on life insurance, casualty insurance and mortgage guarantees. The stock has risen 37% so far this year, and has further to run, given that it is trading at a $27 discount to its book value of $58.71 per share. The recent buyback shrank the share count by 4%, and AIG will likely have other buybacks in the near future. Cramer thinks the success of the secondary offering was an impressive indication of real demand for the stock.

CEO Interview: Herbjorn Hansson, Nordic American Tanker (NYSE:NAT). Other stock mentioned: Exxon (NYSE:XOM)

The shipping industry has been a difficult place to be, given the oversupply of ships. Nordic American Tanker (NAT) is the only shipping stock Cramer thinks is worth investing in, since it has a strong balance sheet and a 9% dividend. However, the quarter was disappointing, with an 18 cent earnings loss when analysts were expecting a loss of 11 cents. One red flag is the fact that the dividend is not being paid entirely from its earnings, but NAT has to raise money to cover the yield. However, CEO Herbjorn Hansson insists, "relatively we are in excellent shape." The company has a deal with Exxon (XOM) to carry their oil in the Atlantic Basin, a deal that should occupy 20-30% of NAT's fleet. Cramer conceded that NAT is the best house in a very tough neighborhood.


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