Cramer Remix: Stocks are bearing the fruits of fear this earnings season
CNBC’s Jim Cramer on Wednesday said too many Wall Street watchers assumed that businesses’ first quarter earnings results would be horrid and now the stock market is rallying on companies besting expectations.
Analysts based their 2019 predictions on the Federal Reserve-induced fourth-quarter sell-off and prolonged U.S.-China trade war, but never revised their outlooks as the economy kept humming, he said.
“We’re seeing the fruits and wages of that fear as company after company beats these expectations that were set down months ago when it felt like the sky was falling,” the “Mad Money” host said. “They keep topping the estimates because those estimates were never raised to begin with, like they would’ve been, typically, at the start of any other year.”
Cramer noted that the following conditions are factoring in to the market run:
- Free cash flow has allowed firms to buy back large amounts of stock
- China has become a strong point for 2019, despite strained trade relations
- Domestic consumerism is maintaining as unemployment remains low
- Raw costs and transportation costs have peaked, but it hasn’t affected consumerism
- the Fed stopped tightening
“Despite some strong jobs data, you’ve got a lot more people who believe a rate cut might actually be likely,” Cramer said. “As long as that’s a possibility, it’s a mistake to leave too much cash sitting on the sidelines.”
Click here to get Cramer’s full thoughts
One step ahead
Don’t wait for the “all clear” on semiconductor sales to make a bet on Texas Instruments, Cramer said.
The semiconductor manufacturer has posted slowing chip sales in recent quarters, and said Tuesday it does not expect demand for chips to improve in 2019. Meanwhile, its shares reached a 52-week high during the session after beating earnings estimates by 13 cents in the last quarter.
“The executives at Texas Instruments aren’t trying to help you time the semiconductor cycle,” the host said. “They’re just trying to run the business, and that’s a very different thing.”
Read more here
Domino’s Pizza seeks to expand its global footprint to 25,000 stores in order to achieve its top objectives and build its market share, CEO Ritch Allison told CNBC.
That’s nearly 10,000 more locations in addition to its existing pizza joints in more than 85 markets. The franchise is the second largest pizzeria chain in the world.
“It’s all part of our strategy to fortress the markets that we operate in, which brings a lot of benefits,” Allison explained to Cramer. “[It] gets us closer to the customer so our service improves, lowers the cost of that delivery as we’re driving fewer miles, and also frankly improves the wages for our drivers because they’re getting more delivery runs per hour.”
Read more about Domino’s Pizza’s expansion plans here
Adapting to the subscription economy
More and more companies are turning to the emerging subscription economy, and it could be time for the manufacturing industry to tune in, Zuora CEO Tien Tzuo told CNBC Wednesday.
“They know how you use your product. They provide a service to you,” Tzuo said in a sit down with Cramer. “What you’re gonna see is every physical product, from appliances [at] Whirlpool, cars from Ford, tractors from Caterpillar, they’re all going to go through a transformation and become services.”
In the past 7 years, Cramer pointed out, subscription businesses have grown revenue five times faster than the S&P 500, according to a subscription economy index. That equates to about 300% of growth during that period, Tzuo added.
Learn more about the subscription economy here
The power of platform
Of the 20 deals that ServiceNow inked in its first quarter, 17 included services for three or more products. CEO John Donahue told Cramer “that’s the power of being a platform.”
“We enable you to digitize and automate workflow all across the company that allows you to deliver great experiences for your employees and customers and unlock productivity,” he said. “Platform is what enables the growth of all the applications on top.”
Catch the full interview here
Cramer’s lightning round: I’m staying away from most auto stocks
In Cramer’s lightning round, the “Mad Money” host zips through his thoughts about callers’ stock picks of the day.
Textron Inc.: “Textron reported an upside surprise. I figured the stock would have some staying power. No, it just went right back down and that’s why I say [don’t buy.”
Halliburton Co.: “Is it time to move into the house of pain? I don’t know. I don’t even want to sublet there.”
Eagle Pharmaceuticals Inc.: “I think nothing of it. I don’t like the specialty pharmas at all. Let’s take a big ole pass on that one.”
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