Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Wednesday October 24.
After the pounding stocks took on Tuesday, Facebook (FB) stunned The Street on Wednesday with its comeback earnings call. The stock rose 19% on good news about mobile ads, which had been Facebook's Achilles' heel. "Only someone with an out-of-control imagination could have seen this coming," said Cramer. Currently 14% of FB's business is mobile ads, and the Instagram acquisition should be accretive in the near future. Cramer said CEO Mark Zuckerberg sounded like a true capitalist on this call and not like a mere social media maven; "After being initially blind-sided by mobile, Facebook is now a step ahead of it." Zuckerberg said that clients liked the company's mobile application more than desktop because of easier access. While there were worries that mobile ads are cheaper and would hurt FB's bottom line, the fact is that, since 70% of FB users access it on mobile, advertisers will actually buy mobile ads more aggressively. A key to transforming mobile's disadvantage into a plus for FB was the company's adoption of Apple's (AAPL) mobile operating system. Clients are reporting success and greater sales because of Facebook's mobile ads. Cramer thinks Facebook's 19% move up is justified.
Cramer took some calls:
Millennial Media (MM) is a good takeover candidate. Cramer would hold on to it.
Pandora (P) is not worth buying.
Yahoo (YHOO) may make a comeback with its new CEO. Cramer thinks if the company moves more aggressively into mobile and social, the stock could see $20.
Cymer (CYMI) is a stock Cramer would sell to take gains.
Dupont (DD), PPG Industries (NYSE:PPG), Chipotle Mexican Grill (NYSE:CMG), Buffalo Wild Wings (BWLD), Panera Bread (NASDAQ:PNRA), Union Pacific (NYSE:UNP), Norfolk Southern (NYSE:NSC), Honeywell (NYSE:HON), 3M (NYSE:MMM), Amazon (NASDAQ:AMZN), US Airways (LCC), Corning (NYSE:GLW), Regions Financial (NYSE:RF), Huntington Bancshares (NASDAQ:HBAN), KeyCorp (NYSE:KEY)
Many see this earnings season as disappointing and it seems that the majority of reports are missing their targets. After bouncing around, the Dow closed only slightly down Wednesday, so given the lackluster earnings season, why haven't stocks been hit harder? Cramer thinks there are enough winners to balance out the losers, and the key is execution. While companies that miss earnings blame industry-wide issues, some companies in the same sector facing the same issues are performing well. Cramer compared and contrasted a few of these companies:
In contrast to Dupont's (DD) spectacular disappointment, PPG Industries (PPG) reported strong earnings, because it is making the transition away from commoditized chemicals that can be easily duplicated to proprietary products. Dupont had outlined a similar strategy, with plans to diversify into agriculture and safety, but the company lacks alacrity and execution. Titanium dioxide, which is a commodity chemical, was responsible for much of DD's disappointment. PPG, however, is spinning off its commodity chemicals business entirely and is focusing on its unique products. PPG is up 40% for the year, and DD is down 2%.
Buffalo Wild Wings (BWLD) reported a terrible quarter, with a dramatic slowing of same store sales. Chipotle Mexican Grill (CMG) began the year with same store sales at 12%, and the number has dropped to 4.5%. However, Panera Bread (PNRA) is showing a strengthening of same store sales to 6-7%, even after implementing price increases. Management says the secret to Panera's success is the quality dining experience it offers customers and its ever-changing, innovative menus. While BWLD is up 11% for the year, this is still a significant drop-off from its former level. CMG is down 28% and Panera has risen 19%.
Contrary to popular belief, not all railroad companies are the same, even those which transport coal, like Union Pacific (UNP) and Norfolk Southern (NSC). UNP has seen a 14% rise this year, but NSC guided down earlier in the year and slashed numbers again. NSC has lost 16% for the year. Honeywell (HON) is a diversified industrial that is benefiting from the auto and aerospace boom. The company recently boosted its outlook, while 3M (MMM) slashed its forecast. From these examples it is clear that the disappointment in earnings is not across the board; some companies are simply executing better than others.
Cramer took some calls:
Amazon (AMZN) cut numbers, and Cramer would stay away, especially since the stock has run significantly.
US Airways (LCC) is the only airline stock Cramer said he would consider buying, given its deal with American Airlines. However, he doesn't think oil will stay low enough for long enough to stay in LCC, and he would take gains.
Corning (GLW): In spite of its cutting edge glass technology, Corning "just can't seem to get it together." The stock is too hard to own.
Regions Financial (RF) cut its target, and is not a bank stock that Cramer likes. He prefers Huntington Bancshares (HBAN), and likes Keycorp (KEY) even better; he thinks KEY is the cheapest regional bank.
CEO Interview: Martin Franklin, Jarden (NYSE:JAH)
With the strong performance of discretionary consumer goods companies, Jarden (JAH) joins the list of winners in the space. Jarden owns well-known brands like Coleman, Oster and Rollins, and has 100 brands in dozens of product categories. The company beat earnings by 4 cents and reported in-line revenues. The stock trades at a remarkably cheap 11 times earnings. Martin Franklin discussed Jarden's focus on brand investment and research and development. The company spends a million dollars a day on developing and promoting new products, such as aesthetically pleasing and compact smoke detectors and football helmets that reduce the risk of concussions.
Jarden is a major player in the outdoor space, and is the leader in outdoor hard goods, such as skis, snowboards and tents. Franklin added that the outdoor segment is becoming increasingly popular overseas. The company recently issued a tender offer, and Franklin says that as long as cash flow is strong, he intends to continue buying back shares.
Cramer is bullish on Jarden.
NPS Pharmaceuticals was a stock Cramer recommended because it has a promising orphan drug treatment for short bowel syndrome. The stock spiked 31%, and Cramer encouraged taking profits. The FDA panel unanimously recommended approving the drug, but NPS has pulled back because of worries about valuation. Cramer thinks it is worth buying again, not only for this drug, but for its healthy pipeline.
CEO Dr. Francois Nader discussed the current FDA panel, which was in favor of recommending the drug by 12-0. "We were thrilled with the outcome," he said. NPS also receives royalty payments for its hyperthyroidism drug it sold to Amgen (AMGN). The company has drugs in the pipeline with expected approvals for 2013 and 2014. "There is good news left in this stock," said Cramer. "Go back to it. There is a lot in the pipeline here."
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