Mid-to-late August tends to be the time of year when earnings season “goes out with a whimper, not a bang,” CNBC’s Jim Cramer said on Friday.
But that doesn’t mean there’s no opportunity in the stock market, the “Mad Money” host said.
Cramer argued that the lack of earnings reports will actually give investors time to do their homework and make informed investing decisions amid the market-moving trade war and other unforeseen corporate news.
“There’s plenty of time to study and critique and calibrate and make considered judgments because, at last, the number of earnings reports that happen each day … slow[s] to a trickle,” he told investors.
With that in mind, Cramer turned to his weekly game plan:
Monday: Sysco Corporation
Cramer has never regarded food services giant Sysco as an investment, but he often uses it as a barometer for how the restaurant business is faring.
“That is, until Nelson Peltz, the famous insurgent activist … investor, took a 7 percent stake in the company three years ago and got himself a board seat. Now, this stock’s been an incredible long-term performer since then,” Cramer said ahead of the company’s Monday earnings report.
Shares of Sysco have run more than 70 percent since Peltz took his stake in August 2015.
“I like Sysco very much,” Cramer said.
Tuesday: Home Depot, Tapestry, Canopy Growth Corp.
Home Depot: People are more nervous about Home Depot’s upcoming earnings report than any other time Cramer can recall.
“Why? First, we know the spring was late. The big spring planting season was a bust for many garden stores because the weather was so darned terrible,” he explained. “Now, that’s not enough to derail this great company on its own, but we are also getting some weaker numbers from many of its suppliers.”
The “Mad Money” host cited the underperformance in shares of building supply manufacturers Masco, Fortune Brands Home & Security and Stanley Black & Decker, all of which are Home Depot suppliers.
Cramer warned that their weakness could have hit Home Depot this quarter, and while weather provides a legitimate excuse, Home Depot’s stock is still risky having outperformed them this year.
“At this point, stay on the sidelines. Pounce on it if Home Depot gets hit,” he said. “This is one of the greatest retailers of all time. Whenever it pulls back, I think you’re getting a gift.”
Tapestry: The artist formerly known as Coach will also deliver its quarterly earnings report on Tuesday, and Cramer expects “very good” results.
“We know from the department stores that handbags are hot, hot, hot,” he said. “I recommend buying some before the quarter and some after.”
Canopy Growth: This cannabis play reports earnings after Tuesday’s closing bell, and Cramer figured that Canada’s recent legalization of recreational marijuana could cause an end-of-Prohibition-like explosion in sales for pot producers when it is put into effect.
The “Mad Money” host also liked Canopy’s position given the backing of Constellation Brands, a massive U.S. alcohol distributor that owns a 10 percent stake in Canopy with an option to buy more.
“That said, the stock’s been a dog of late, with hot money flowing out of it betting that the pot trade has gone up in smoke. I think that’s premature,” Cramer said. “Canopy’s a full-service player with a tremendous first-mover advantage. I wouldn’t be surprised if the stock is charging up to another run at the highs later this year.”
Wednesday: Macy’s, Cisco Systems
Macy’s: Cramer wanted more clarity on why Macy’s stock has stalled of late. He wondered if it ran too much since its last report or if consumers’ spending habits have changed.
“All I know is this: every major supplier into Macy’s has told us that they’re having a bang-up quarter,” he said. “PVH, [Michael] Kors and VF Corp [are] saying good things. I’d be a buyer of Macy’s if it dips ahead of the report.”
Cisco: For Cramer, Cisco’s earnings report will be the most important one of the week as Wall Street keeps a close eye on CEO Chuck Robbins’ push to make Cisco more of a security-focused software subscription enterprise.
Praising Robbins and his team for “moving mountains” to build Cisco’s recurring revenue stream, Cramer acknowledged that other companies that have made the transition to selling software have had “some growing pains.”
“I expect Cisco will deliver a good quarter,” he said. “Maybe it won’t be the monster grower that some want, but I believe the re-positioning of Cisco into high-growth mode will take a little time. Be patient. You have to stay in it for the inflection point, which could be right around the corner. Call me a buyer.”
Thursday: Walmart, Nordstrom, Applied Materials, Nvidia
Walmart: Walmart’s earnings report on Thursday will prove if technician Tim Collins was right about a potential rally in the stock in Cramer’s latest “Off the Charts” segment.
“Collins suggested that Walmart might be on the verge of a breakout, which I have to believe would come from this quarter. I’ll say this: it can’t be as weak as the last one,” Cramer said. “Its stores [and] the fundament of retailing … look fantastic, and the prices remain divine. Walmart’s stock has lagged the rest of the retail party recently. You know what? I think it’s cheap. I think it’s compelling.”
Nordstrom: “To say last quarter was a bomb would be putting it way too lightly,” Cramer said of the apparel retailer’s previous earnings report. “It was a nuclear warhead that landed right in your wallet.”
Ahead of Nordstrom’s next report, Cramer, whose charitable trust owns the stock, told investors to avoid it.
“The company has inspired no one,” he lamented. “The Nordstrom guys always seem to find a way to screw it up. I do admire their consistency in being inconsistent.”
Applied Materials: This chipmaker also failed to impress investors with its last earnings report, but Cramer doesn’t think things have gotten worse in its most recent quarter.
“I think the company has gotten their inventories in line,” he said. “In fact, I’m betting that, like with its competitor Lam Research, this stock is trying to bottom. We await the conference call for validation.”
Nvidia: Cramer has heard whispers that Nvidia’s upcoming earnings report could be a mixed bag, in part due to softer cryptocurrency demand and in part due to the strength of competitors like AMD, but he’s not too worried.
“I actually like that the expectations have been reduced here,” he admitted. “I just wish the stock would follow suit and kind of cool off going into the quarter.”
Friday: Deere & Co.
Swept up in the debate around world trade, agriculture and construction equipment manufacturer Deere could deliver a weaker than expected earnings report on Friday, Cramer warned.
“The farmers of this country are starting to squawk that they aren’t doing well because of the retaliatory tariffs from our trading partners, and that means Deere’s quarter may not be up to snuff,” he said. “That said, though, I think that Martin Richenhagen, CEO of the very similar AGCO, told a good story when he last came on the show. It’s a real tough call. Maybe you just wait to see what happens.”
Conclusions
With earnings season coming to a close, Cramer recommended investors use their time wisely.
“We’ve almost made it through earnings season. I say good riddance — too much stress — but don’t forget to look for buying opportunities among the stocks I just highlighted, because many of them could be potential winners next week,” he said.
