Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday, October 31.
Phillips-Van Heusen (PVH) rose $18 on the news that it is buying Warnaco for a 35% premium. The acquisition should add 35 cents a share to PVH in its first year. While acquisitions can be challenging to integrate, CEO Emmanuel Chirico said that this deal will go much more smoothly, since it involves "uniting the house of Calvin Klein." CK's jeans and underwear business had been underperforming under the management of Warnaco, and PVH's talent with promoting the CK brand might mean upside in this segment.
Chirico added that the Calvin Klein and Tommy Hilfiger brands are popular in Asia and Latin America, and PVH’s business is growing in those areas at a rate of 20% and 30% respectively. With the acquisition of Warnaco, PVH expects to expand the jeans and underwear business. Concerning Speedo swimwear, Chirico said, “We love brands that have a niche market,” and added that Speedo has a high operating margin at 15%. “We were surprised when we did our due diligence about how strong the business was.” The CK jeans business has been a “challenge” in North America and Europe, and when the acquisition is fully integrated there should be a comeback for the business. “I think we know exactly what needs to be done … we can take that business and turn it around and bring it back to historical levels of profitability.” PVH had a strong October, and the company updated guidance, with comps running up 15% for Tommy Hilfiger’s European business.
Cramer is bullish on PVH, and said it has a “good management doing good things for shareholders.”
CEO Interview: Sandy Cutler, Eaton (ETN). Other stock mentioned: Cooper Industries (CBE).
Sometimes a company's prospects and performance can transcend a lackluster earnings report. Eaton is a diversified industrial that provides electricity, energy savings products, truck transmissions and hydraulic devices. The company should have a significant role to play in the rebuilding process in the aftermath of Hurricane Sandy. CEO Sandy Cutler discussed the fiscal cliff issue and how it should be resolved with bipartisan support, but added that worries about the fiscal cliff did not negatively affect business. Eaton's electric business reached record levels in the U.S. and is surging back in other countries. A full 60% of Eaton's revenues are generated from the electric business, and its recent acquisition of Cooper Industries (CBE) should mean more upside. The company has a secure balance sheet and margins are strong.
"Someone is going to have to fix the power grid," after Hurricane Sandy, said Cramer, "and it's going to be Eaton." Cramer would buy Eaton at its current price.
CEO Interview: John Foraker Annie’s (BNNY).
Usually Cramer doesn’t recommend buying a hot IPO in the aftermarket, but he made an exception in the case of Annie’s (BNNY), which came public in April. The stock soared 89% on its first day as a publicly traded company, and even after pulling back, is up 14% from where Cramer recommended it. The company announced a solid quarter, although there was a slip in sales due to a “quality problem” -- not keeping up with demand. CEO John Foraker said that mac and cheese sales could have been up by 23-23% rather than by 20% because of a mistake in the forecast, but he believes that, going forward, “We have a great brand and need to execute at a high level.” The brand has gone from having been isolated on side aisle reserved for natural foods to occupying the main shelves. Foraker said the key to this transition is convincing store managers that healthy food is not a fad and is a priority for high-income, loyal customers.
Annie’s has recently launched its organic pizza brand, which is still in its early phases, and Foraker discussed the move into frozen food.
“This one has staying power,” Cramer said, and suggests buying on a pullback.
CEO Interview: Steve Tanger, Tanger Factory Outlet Centers (SKT).
Stores will be opening up after a hiatus caused by Hurricane Sandy and Tanger CEO Steve Tanger is pleased to say that all of its stores, except in Atlantic City and a few in Connecticut, are back in operation. Tanger is a REIT that runs 40 outlet centers and yields 2.7%; it has raised its dividend every year since going public. The REIT raised its occupancy rate to 98.6%. The CEO discussed the fact that most of Tanger’s clients are not vulnerable to e-commerce, and they sell discounted fashion items that consumers want to buy in stores. The company has enough cash to cover its dividend by 150%. Tanger’s stores have seen an increase in traffic throughout the year, a trend that is expected to continue into the holiday season.
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