Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday July 25.
Both AT&T (T) and Verizon (VZ) reported strong quarters, are seeing growth in wireless, have similar churn and subscription rates, and both are aiming to reduce subsidies for handsets. However, AT&T is the clear winner in this category, because it owns 100% of its wireless business, while Verizon owns just 55%. The companies have similar dividends; Verizon yields 4.5%, AT&T, 5%, and their PEG ratios are similar. Verizon's wireline business was weak, and it faces significant competition. AT&T reported a decent wireline number. AT&T was the first to have exclusive service with the iPhone, so on the Apple (AAPL) exposure metric, AT&T edges past Verizon. Cramer thinks AT&T is the clear winner, but if Verizon's price comes down, they would be nearly equal.
Cramer took some questions:
Activision (ATVI) is a "flatline stock in a flatline business."
Boeing (NYSE:BA), Honeywell (NYSE:HON), Caterpillar (NYSE:CAT), Broadcom (BRCM), Pepsi (NYSE:PEP), Panera Bread (NASDAQ:PNRA), Whole Foods (NASDAQ:WFM), Akamai (NASDAQ:AKAM), Buffalo Wild Wings (NASDAQ:BWLD), Molycorp (MCP)
With the Dow finishing up 59 points, breaking its previous 3 day losing streak, Cramer said there are still good stories among certain stocks. Boeing (BA) demonstrated that the rumors of the end of the aerospace cycle were greatly exaggerated; Airbus' main problem seems to be Airbus. Honeywell (HON) CEO Dave Cody, appeared on Mad Money recently and, as a partner with Boeing, said orders for aerospace were strong. Boeing reported 20% revenue growth, one of the best of any major company, and raised guidance by almost 10%. The company has a $374 billion backlog and $13 billion in new net orders.
Caterpillar (CAT) was a stock that investors had given up on, and was down 10% going into the quarter, yet the stock rose $3 on Wednesday. The company acknowledged weakness, but said that China could react positively to the country's stimulus, and there might be a comeback in housing. Cramer noted that CAT has historically performed best with oil at around $90.
Broadcom (BRCM) reported a strong quarter, and the stock rallied $2.29. Pepsi (PEP) reported 5% organic growth in Europe. While Cramer is usually a fan of companies that break themselves up to unlock value, he has been critical of those who suggest that Pepsi should spin off its snacks division. Cramer thinks Pepsi is worth more than the sum of its parts. Panera (PNRA) performed well following its earnings, and Whole Foods (WFM) jumped 10% after its report. Akamai (AKAM) surged 5 points after an unexpectedly good quarter.
However, some stocks are showing little immunity. Apple gave up 25 points after its earnings disappointment, and Buffalo Wild Wings (BWLD) lost 8% after it reported disappointing earnings and guided down.
Cramer took a question:
Molycorp (MCP) is not in a sector Cramer likes, and it remains a Sell.
CEO Sally Smith, Buffalo Wild Wings. Other stocks mentioned: Chipotle Mexican Grill (NYSE:CMG)
Buffalo Wild Wings was a rapidly-growing stock, but after its hiccup in recent earnings, the stock fell 8 points or 10.7%, nearly giving up its gains for the year. BWLD reported a 6 cent earnings miss and lowered its guidance from 20% to 15%. Same store sales were 5.3%, lower than expected, but still higher than many of BWLD's competitors. CEO Sally Smith said, "These are the highest wing prices I've ever seen," while in 2011, wing prices were at record lows. Although this problem is due to the drought and is not permanent, Smith explained that she doesn't foresee an easing of this issue in the next 3-6 months, and explained that this is the reason guidance was cut. The company is implementing price increases, which isn't harming traffic, according to Smith.
Cramer posed the question that perhaps, as indicated by Chipotle Mexican Grill (CMG), consumers are staying home. Smith replied that she has not seen less traffic, and since BWLD is connected with popular sporting events and is still an inexpensive place to eat, even in a pinch, the consumer will still go to BWLD. When asked if the healthy eating trend and possible regulations to require putting calorie counts on menus might hurt the company, Smith noted that calorie counts are already on BWLD's menus in New York and California, and there hasn't been a reduction in traffic at these stores. In any case, people go to BWLD to have a good time and to forget about calories. Cramer noted that Panera Bread rose 12 points on identical same store sales numbers as BWLD, which dropped 8. He posed the question that perhaps BWLD has been excessively punished.
CEO Interview: Scott McGregor, Broadcom
Tech stocks are having a hard time, but Broadcom delivered a stellar number in spite of the harsh environment. BRCM beat earnings estimates by 5 cents, with revenues up 9.7% yoy. While expectations were low to begin with, BRCM is showing clearly that its end markets are growing, it is taking market share and management has excellent execution. CEO Scott McGregor discussed how BRCM's chips improve connectivity and how the company is growing through smart acquisitions. "This is the best semiconductor quarter I've seen in a hard business," Cramer said. "It is a great innovator. I own it for my charitable trust, and I'm sticking with it. You should too."
Is Apple Worth Buying On Its Decline?
While Apple has seen a decline of 25 points, this might look more dire than it really is, because of the high price of the stock. Cramer suggested investors imagine a $60 stock shedding $2.50. While this wouldn't be a good thing, it certainly wouldn't seem like a disaster. Apple still has a low multiple of 11, and taken together with its growth rate, Apple is cheaper than most tech stocks and even less expensive than many of the defensive consumer goods stocks. While Apple suffers from the fact that 24% of its sales are from Europe, and that Verizon and AT&T might cut subsidies for handsets, one cause for the earnings miss could have been that consumers were holding off on buying Apple products, since the company is releasing a new iteration of the iPhone as well as iTV. Cramer is still bullish on Apple.
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