Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Monday May 21.
A Bit Of Advice For Ron Johnson: J.C. Penney (NYSE:JCP). Other stocks mentioned: Pier 1 Imports (NYSE:PIR), Target (NYSE:TGT), Apple (NASDAQ:AAPL)
J.C. Penney (JCP) faced great expectations when Ron Johnson, architect of the Apple (AAPL) Stores after spending 16 years at Target (TGT), took the helm. However, Johnson's ambitious plans for JCP did not come to fruition. The company missed earnings, saw an 18% decline in same store sales, discontinued its dividend and saw its margins squeezed. Johnson sounded upbeat, which made people wonder if he had delusions of grandeur. One sweeping strategy that has not worked is Johnson's doing away with promotions that customers enjoy and creating an "every day low price" initiative. However, customers, who like special deals, stayed away from JCP.
Cramer's advice for Johnson is that he follow the lead of Alex Smith, CEO of Pier 1 Imports (PIR). In 2009, PIR was trading at 10 cents, now it is priced at $16. The company dramatically revamped its stores, changed its merchandise selection, focused on smaller ticket items, increased the visibility of merchandise by altering the layout of the stores, and converted many full-time positions to part-time. Sales per square foot for PIR increased from $150 to $184 in the last year, same store sales are in the high single digits to low double digits, operating income has increased 49% year over year, and PIR is introducing a dividend. Cramer thinks PIR is still a buy at its current level.
Dean Foods (NYSE:DF)
European problems have nothing to do with the price of milk in the U.S. Dean Foods (DF) is the ultimate domestic play, with 78% of its revenues coming from milk. It has 30% market share in the U.S. milk business, and with the price of milk going down and expected to decline another 20% by the end of the year, DF will be a main beneficiary. A year ago, the company was lumbered with debt, was facing competition from private label brands and was struggling with raw costs. The debt is now manageable, and DF's White Wave All Pro division, which specializes in organic and healthier milk products, is gaining in popularity. For the lactose intolerant, DF makes soy, almond and coconut milk. DF beat earnings by 10 cents in its latest quarter with revenues that rose 5.4% and operating margins increasing 120 basis points. The stock is up 28% so far this year, and Cramer would wait for a decline to $13 before buying.
Which is the better buy, Facebook (FB), or buying into the merger of Eaton (ETN) and Cooper Industries (CBE)? These latter two stocks have been battered lately, since they are industrials, but they reported strong earnings. There are some advantages to buying the deal and being paid to wait by the high dividend until industrials recover. However, Facebook, unlike many social media stocks, is a real company with solid earnings. Its main challenge is to monetize its mobile segment. Cramer would buy FB when it trades at 15 or 16 times earnings, and it needs to drop a bit from its current level. Eaton (ETN) or Cooper (CBE) might be a buy for value investors.
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