As Wall Street dives into the heart of earnings season, Jim Cramer has provided insights into market trends and earnings reports to watch in the upcoming week. Cramer remarked,
“It’s hard to believe, but this market’s now been up for six straight weeks. That’s right, despite interest rates running higher since mid-September, despite being on the verge of an election where both candidates want to pile on trillions of dollars of debt to an already unfathomable amount of borrowing, this market seems like it can’t help itself from going higher.”
Cramer highlighted the influence of the Federal Reserve, noting that ever since the rate cut on September 18, the market has largely trended upward. He emphasized that it is not solely the Fed driving this bullish sentiment, the earnings season has brought some remarkable quarterly results. With strong performance from banks kicking off the earnings cycle, Cramer posed the question of whether the rally could extend into a seventh consecutive week, suggesting following his game plan to assess this possibility.
On a separate note, addressing economic indicators, Cramer warned that if the economy continues to produce solid numbers, the likelihood of substantial rate cuts will diminish. While he believes that rates will eventually decline, he cautioned those shorting Treasurys, suggesting that they may be making a mistake.
Cramer noted a significant caveat, which is the upcoming election, and pointed out that both candidates are advocating potentially inflationary policies.
“Both candidates have pushed potentially inflationary policies. As I said at the top, if Trump can win enough of a majority to pass his huge tariffs, or Harris expands housing tax credits and de facto subsidy, they could push home prices higher. Then inflation might stage a comeback. But I’m not betting on that. I think both parties are terrified of being blamed for inflation, which almost single-handedly sunk Joe Biden’s presidency. No matter what the candidates campaign on, I don’t see their allies in Congress taking any chances with inflation beyond the usual unwillingness to balance the budget.”
He concluded that those betting against Treasurys have overreached, suggesting that their efforts to counter the Fed’s policies are unlikely to end well. Cramer observed that when a large number of investors align on one side of a trade, as seen currently, that group often ends up being incorrect.
Jim Cramer’s Game Plan: 23 Stocks to Watch
Our Methodology
For this article, we compiled a list of 23 stocks that were discussed by Jim Cramer during his episode of Mad Money on October 18. We listed the stocks in ascending order of their hedge fund sentiment as of the second quarter, which was taken from Insider Monkey’s database of more than 900 hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Jim Cramer’s Game Plan: 23 Stocks to Watch
23. Southwest Airlines Co. (NYSE:LUV)
Number of Hedge Fund Holders: 23
Cramer recently mentioned Southwest Airlines Co. (NYSE:LUV) and its ongoing proxy battle with Elliott Management.
“Southwest Air is looking at a long and hard proxy fight because it hasn’t been willing to give in to the demands of Elliott Management, a very, very smart hedge fund. I think Southwest would have an easier time… if it reports a good quarter like we just got from United.”
Southwest Airlines (NYSE:LUV) is a well-known passenger airline that provides scheduled air transportation services throughout the United States and into select near-international markets. Bloomberg reported on Saturday, citing people familiar with the matter, that discussions have emerged between the company and Elliott Investment Management regarding potential settlement talks aimed at avoiding a proxy battle for control over the airline’s board.
Reports indicate that Elliott has proposed a plan to secure board seats without gaining full control, although there is uncertainty about the outcome of these negotiations. Elliott’s involvement has intensified in recent weeks, particularly after the firm acquired a $2 billion stake in Southwest, prompting calls for significant changes within the organization, including the replacement of CEO Bob Jordan. You can read a summary of Elliott Management’s recent investor letter here.
In response to Elliott’s demands and to reinvigorate its performance, Southwest announced a series of initiatives, such as revisions to its seating policy, the introduction of red-eye flights, new vacation packages, and a partnership with Icelandair. These moves were accompanied by a board refresh, with Executive Chair Gary Kelly set to retire from his role after the upcoming annual meeting, and plans to nominate four new board members.
In September, Southwest Airlines (NYSE:LUV) laid out its own plan for improvement, including the introduction of assigned seating slated for the second half of 2025, along with premium seating options and boarding upgrades. The airline is also focused on strengthening global partnerships and streamlining operations, acknowledging that these changes will require time to implement. It also provided a more optimistic outlook by raising its revenue forecast for the third quarter, now expecting an increase of 3%, an improvement over an earlier prediction of a 2% decline.
22. SAP SE (NYSE:SAP)
Number of Hedge Fund Holders: 31
During the episode of Mad Money, Cramer started his game plan for the week with SAP SE (NYSE:SAP). He said:
“… This is the German software giant… SAP has been delivering stellar results as it advises companies on tech strategies, including cloud enterprise resource planning and adopting artificial intelligence. They’re very good. They have a lot of ideas for you. A lot of companies love to sign up with them.”
SAP SE (NYSE:SAP) is a provider of a wide range of applications, technology, and services that support various business functions, including finance, human resources, and supply chain management.
SAP SE (NYSE:SAP) reported its third-quarter earnings result on October 21. In the quarter, it demonstrated strong business momentum, with the current cloud backlog increasing by 25% to €15.38 billion, and showing a 29% rise when adjusted for constant currencies. The acquisition of WalkMe contributed about 1% to this growth. Cloud revenue reached €4.35 billion, marking a 25% increase. The growth was largely driven by the Cloud ERP Suite, which saw revenue grow by 34% to €3.64 billion.
However, software license revenue experienced a decline, decreasing by 15% to €0.28 billion. In contrast, cloud and software revenue combined increased by 11% to €7.43 billion. Overall, total revenue rose by 9% to €8.47 billion. Free cash flow showed significant improvement in the third quarter, rising by 44% to €1.25 billion.
Although around €0.3 billion was allocated for restructuring efforts, the positive development primarily stemmed from increased profitability and reduced tax payments. Over the first nine months, free cash flow increased by 47%, reaching a total of €5.03 billion.
21. Nucor Corporation (NYSE:NUE)
Number of Hedge Fund Holders: 40
Mentioning traditional investment strategies, Cramer said it could be “interesting” to buy Nucor Corporation (NYSE:NUE) shares post rate cutting.
“Nucor’s tough, though. See, while steel pricing’s weak, the old hedge fund playbook says you should buy steelmakers like Nucor after the first rate cut because that’s when their stocks typically start to turn ahead of pricing of steel. Could be an interesting level to get long here.”
Nucor (NYSE:NUE) is engaged in the manufacture and sale of a range of steel and steel products. In addition to its core activities, the company is involved in the production, processing, and trading of raw materials, alongside offering services related to metal and industrial gases.
In its earnings report for the third quarter announced on October 21, the company reported consolidated net earnings of $249.9 million or $1.05 per diluted share. In comparison to the same quarter in 2023, when net earnings reached $1.14 billion, or $4.57 per diluted share, the latest figures show a decrease in profitability. Despite these fluctuations, the company maintained a solid financial position, ending the quarter with $4.86 billion in cash and cash equivalents, along with short-term investments.
Throughout the third quarter, Nucor (NYSE:NUE) repurchased around 2.5 million shares of its common stock at an average price of $156.07 per share. Year-to-date, the total share repurchases reached approximately 11.0 million shares at an average price of $172.36. Over the first nine months of 2024, the company returned about $2.29 billion to its stockholders through both share buybacks and dividend payments. As of late September, the company still had approximately $1.42 billion authorized and available for additional repurchases under its existing share repurchase program.
20. Texas Roadhouse, Inc. (NASDAQ:TXRH)
Number of Hedge Fund Holders: 42
Cramer likes Texas Roadhouse, Inc. (NASDAQ:TXRH) and highlighted the public’s love for its economical meal prices.
“More clockwork love, Texas Roadhouse. Everybody seems to love this favorite restaurant chain. Got $11 dinner everybody’s raving about. Put it up there with Brinker and Wingstop as winner, winner, chicken dinner.”
Texas Roadhouse (NASDAQ:TXRH) is a well-established casual dining chain that operates both domestically and internationally, offering a diverse menu centered around high-quality steak and Southern-inspired dishes. The company also franchises restaurants under the names Texas Roadhouse, Bubba’s 33, and Jaggers. On October 15, Evercore ISI analyst David Palmer raised the price target on the stock to $200 from $195 and maintained an Outperform rating.
The adjustment came because of a broader trend observed in the restaurant industry, where effective marketing strategies have proven successful. The analyst noted that top-performing establishments continue to thrive, indicating a growing list of winners amid varying market conditions. Following adjustments to third-quarter sales forecasts, the firm is also revising earnings per share estimates and refining projections for same-store sales growth.
As Texas Roadhouse (NASDAQ:TXRH) looks toward future quarters, management remains optimistic about sustaining growth momentum. During the first four weeks of the third quarter, the company reported an 8.0% increase in comparable restaurant sales. It expects moderate commodity cost inflation of about 2% for the remainder of the year while maintaining an effective tax rate of around 14.5%. Capital expenditures for the year are projected to range between $360 million and $370 million.
19. The Boeing Company (NYSE:BA)
Number of Hedge Fund Holders: 42
Cramer expressed shock over how The Boeing Company (NYSE:BA) stock still gets bought despite its inefficient management. Here’s what he had to say:
“Here’s a shocker. No matter how poorly Boeing is run, and it’s become the benchmark for bad management, the big institutions are possibly Pavlovian about buying the stock. They can’t get enough of it. Boeing has to hope that the buyers can maintain their appetite through an already miserable pre-announced quarter because it needs to sell about $25 billion in stock to fix its balance sheet. And I’m betting that deal could come very, very quickly, maybe even the day the company reports. If you really want to own Boeing, save your powder until after the secondary offering, as it’ll most likely come at a nice discount.”
The Boeing Company (NYSE:BA) focuses on the design and manufacture of a range of products, including commercial jetliners, military aircraft, and satellites. The company has faced significant challenges for a while now. Recently, the machinist union has demanded a substantial 40% wage increase over four years, along with the reinstatement of a defined benefit retirement pension.
In response, the company reached a tentative agreement with the International Association of Machinists and Aerospace Workers, which offers a 35% general wage increase over the same period, a 4% annual bonus, and improved 401(k) matching, along with a $7,000 ratification bonus and enhancements to pension plans. This deal is crucial, as it is set to be voted on by union members on October 23, following a five-week strike that has halted production and created uncertainty for the company’s operations.
Amid these labor negotiations, The Boeing Company (NYSE:BA) grapples with financial pressures, facing over $50 billion in debt against just over $10 billion in cash reserves. Even if the company finalizes the agreement with the union, the expected increase in labor costs could further strain its finances.
Additionally, The Wall Street Journal reported on Sunday that Boeing may consider selling underperforming assets to bolster its cash position. Recent board meetings in Arlington, Virginia, have involved scrutinizing the performance of various divisions to address the ongoing crises.
In a recent move to generate funds, the company announced the sale of Digital Receiver Technology, a company specializing in wireless equipment for intelligence services, to Thales Defense & Security, a branch of Thales SA, a leading European defense electronics firm. The company has also expressed it could potentially raise up to $25 billion through a mix of stock and debt offerings, as its investment-grade credit rating faces challenges due to production delays, safety concerns, and ongoing labor strikes.
18. Kimberly-Clark Corporation (NYSE:KMB)
Number of Hedge Fund Holders: 43
Referring to Procter & Gamble’s earnings which people were okay with, Cramer said that Kimberly-Clark Corporation (NYSE:KMB) is more liked. Cramer said that Kimberly-Clark “is working”.
Kimberly-Clark (NYSE:KMB) is a manufacturer and marketer of personal care and consumer tissue products throughout the United States. The company offers a diverse range of items, including disposable hygiene products, facial tissues, paper towels, and professional hygiene solutions. Renowned brands such as Huggies and Kleenex are among those under which these products are sold.
In the first half of the year, the company reported sales of $10.2 billion. Year-to-date adjusted operating profit for 2024 reached $1.7 billion, marking a 15% increase from the previous year’s $1.5 billion, despite facing a 9% adverse effect from currency fluctuations. Adjusted earnings per share for the period stood at $3.97, up from $3.32 the previous year.
Based on the performance in the first half of the year, Kimberly-Clark (NYSE:KMB) revised its outlook for 2024. Organic net sales are forecasted to grow at a mid-single-digit rate, while reported net sales are expected to be negatively affected by 400 basis points due to currency translation and 120 basis points from divestitures. The company now projects adjusted earnings per share growth at a mid-to-high teens percentage rate on a constant-currency basis, an upward adjustment from earlier expectations of low-teens growth.
17. United Parcel Service, Inc. (NYSE:UPS)
Number of Hedge Fund Holders: 44
Cramer recently discussed United Parcel Service, Inc. (NYSE:UPS) as the company passed his YEV stocks criteria. We explained what the YEV criteria are and more in our article, Jim Cramer’s Exclusive List of 9 YEV Stocks. Here’s what Cramer said on October 18:
“Could this be the quarter that gets UPS out of its funk? It’s possible. And that almost 5% yield might cushion the blow if something goes wrong.”
United Parcel Service (NYSE:UPS) is a prominent package delivery and logistics company, known for its extensive range of services, which include transportation, distribution, contract logistics, and various freight solutions. In September, it announced the acquisition of Frigo-Trans and its sister company BPL, both recognized leaders in healthcare logistics based in Germany.
While the financial details of the transaction were not disclosed, these companies bring significant expertise in managing complex healthcare logistics, including a network of temperature-controlled warehousing spanning six temperature zones and a comprehensive cold chain transportation solution across Europe. The acquisition is expected to improve the company’s capabilities in meeting the growing demands of healthcare customers who require efficient handling of temperature-sensitive and time-critical shipments.
Kate Gutmann, UPS’s Executive Vice President and President of International, Healthcare and Supply Chain Solutions, noted that the rapid advancements in the pharmaceutical industry are driving the need for integrated cold and frozen supply chains. She emphasized that Frigo-Trans will expand the company’s solution offerings and support the company’s ambition to become the leading provider of complex healthcare logistics globally.
On October 10, Wells Fargo raised the price target on United Parcel Service (NYSE:UPS) to $142 from $134 and kept an Overweight rating. Ahead of the third-quarter earnings report, the firm made slight adjustments to its estimates for the fourth quarter but kept its outlook for the third quarter positive. The firm observed favorable trends for the company in the third quarter, with signs of volume growth and pricing actions suggesting a pathway to achieving the company’s full-year guidance.
16. Carrier Global Corporation (NYSE:CARR)
Number of Hedge Fund Holders: 45
Cramer expects strong earnings from Carrier Global Corporation (NYSE:CARR) which will be announced on October 24.
“There was a time when people seemed to ignore the success of David Gitlin at Carrier. Not anymore, you can’t. The stock’s getting its due. It’s now had such a big run that this climate control player may not pop on the earnings numbers, but I sure think they’re going to be strong.”
Carrier Global (NYSE:CARR) provides technologies related to heating, ventilation, air conditioning (HVAC), refrigeration, fire protection, and security solutions, with a global presence. Recently, the company has embarked on a significant transformation journey aimed at becoming a more focused and agile organization, committed to sustainability and higher growth.
In August, the company entered into a definitive agreement to divest its Commercial and Residential Fire business to an affiliate of Lone Star Funds for an enterprise value of $3 billion. The agreement shows a strategic effort to streamline operations, with Chairman and CEO David Gitlin noting that all recent divestitures were executed swiftly, culminating in a total value exceeding $10 billion. He said that it represents a strong mid-teens EBITDA multiple overall, emphasizing the value generated from these transactions.
On October 2, Carrier Global (NYSE:CARR) announced the completion of the sale of its commercial refrigeration business to Haier, its long-term joint venture partner, for an enterprise value of $775 million, which includes around $200 million in net pension liabilities.
The divestiture, along with the completed sales of the Industrial Fire and Global Access Solutions businesses, marks a significant step in Carrier’s portfolio transformation. Gitlin highlighted that three out of four announced business exits have been finalized, with the sale of the Commercial and Residential Fire business expected to conclude by the end of 2024.
15. Honeywell International Inc. (NASDAQ:HON)
Number of Hedge Fund Holders: 50
Recently, Honeywell International Inc.’s (NASDAQ:HON) reorganization and its impact were briefly discussed by Cramer, who said:
“Honeywell recently announced a major reorganization, but can it match that with some good earnings numbers? You know, that last quarter was just okay. In the interim, we got the reorg and the stock is sorted. We own this one for the Charitable Trust, and we’re telling members of the club to stand packed.”
Honeywell International (NASDAQ:HON) is a diversified technology and manufacturing company that operates in various sectors, offering a range of products and services in aerospace, building automation, energy solutions, and industrial automation. The company delivers advanced systems, software applications, specialized materials, and safety equipment to customers globally.
On October 8, Honeywell International (NASDAQ:HON) announced plans to spin off its advanced materials business unit into an independent, publicly traded entity, a move expected to be completed by the end of 2025 or early 2026. The decision is part of a broader strategy by management to streamline operations and improve focus. The advanced materials segment, which includes specialized products such as packaging films and refrigerants, contributes around 10% to the company’s total sales.
Additionally, earlier in the year, Bloomberg reported that the company is nearing the sale of its personal protective equipment business for approximately $1.5 billion and may pursue an initial public offering for its quantum computing division, Quantinuum, valued at around $10 billion.
14. Norfolk Southern Corporation (NASDAQ:NSC)
Number of Hedge Fund Holders: 50
Cramer commented on Norfolk Southern Corporation’s (NASDAQ:NSC) new CEO and recent solid earnings. Here’s what he said:
“Now, we have so many winners reporting, but there’s one lagger that I figure could break out here, Norfolk Southern. It’s got a new CEO, Mark George, who I think will bring some financial discipline to this great railroad. Norfolk Southern could put up some excellent numbers. Previous CEO should get some credit for that, by the way.”
Norfolk Southern (NASDAQ:NSC) offers rail transportation services, moving a wide range of materials, including agricultural products, chemicals, metals, and automotive goods. During the second quarter, the company secured a significant agreement with a metallurgical coal producer, which will involve shipping nearly 5 million tons of premium-grade coal once the mine achieves full production.
On August 1, the company announced plans for a major investment exceeding $200 million to improve capacity along the 3B Corridor in Alabama. The key rail line connects northern and central Alabama to the Port of Mobile, facilitating access to global markets. The 3B Corridor plays a critical role in the company’s overall traffic, serving essential industries such as agriculture, automotive, chemicals, forestry, and steel.
The project includes various improvements to terminal and track infrastructure, featuring capacity upgrades in central and southwest Alabama and multiple grade crossing improvements across the region. The benefits of this investment are expected to materialize as the improvements come online in 2025.
Additionally, Norfolk Southern (NASDAQ:NSC) reaffirmed its guidance for the operating ratio in the second half of the year, projecting a range between 64% and 65%. However, management has adjusted the full-year revenue forecast, now expecting growth of approximately 1%, down from the earlier estimate of around 3%.
13. Texas Instruments Incorporated (NASDAQ:TXN)
Number of Hedge Fund Holders: 50
While Cramer mentioned that Texas Instruments Incorporated (NASDAQ:TXN) has shown cyclicality, he still likes it ahead of the company reporting its third-quarter earnings on October 22.
“After the close, we hear from Texas Instruments. We’ve been hearing a lot about how semiconductor companies are in the doldrums, the ones without AI, that is. Tex Instruments falls into that category but this company’s become much more focused. I like it ahead of the quarter, even though it has a little more cyclicality than most chip makers.”
Texas Instruments (NASDAQ:TXN) is engaged in the design and sale of semiconductors. The company provides a range of products focused on power management, signal processing, and embedded computing, which are utilized across various sectors, including automotive, industrial, personal electronics, and communications. On October 21, TipRanks reported that Susquehanna lowered the price target on the stock to $240 from $250 and maintained a Positive rating.
In previewing the upcoming third-quarter results, the firm noted that the semiconductor industry is facing broad-based challenges, particularly in the automotive and industrial segments, where momentum has started to decline. For the personal computer market, there is an expectation for notebook production to rise in 2024, although the pace may slow toward the year’s end, largely due to AI-related devices not driving demand as anticipated.
In the handset market, forecasts indicate an increase in smartphone shipments for 2024. Additionally, in the data center segment, recent server evaluations suggest a slightly stronger performance in the latter half of 2024, partly driven by AMD’s market share gains.
Texas Instruments (NASDAQ:TXN) management has indicated an awareness that market conditions may not be as favorable as previously thought. In its midyear update to its long-term planning, which is typically conducted once a year, the company maintained its spending plans for 2024 and 2025. However, it revised the outlook for 2026 expenditures, lowering the anticipated range from $5 billion to between $2 billion and $5 billion, contingent on revenue performance at that time.
12. Deckers Outdoor Corporation (NYSE:DECK)
Number of Hedge Fund Holders: 52
Cramer recently commented on Deckers Outdoor Corporation (NYSE:DECK) and said:
“We keep wondering how Hoka is doing and whether it’s still taking share from Nike. Hoka is a division of Deckers Outdoor, which reports after the close on Thursday. I anticipate a strong number for their insurgent running shoe division.”
Deckers Outdoor (NYSE:DECK) designs, markets, and distributes a wide variety of footwear, apparel, and accessories. The company’s product offerings include premium items under the UGG brand, performance gear tailored for athletes through HOKA, and casual footwear and sandals from brands such as Teva, Sanuk, Koolaburra, and AHNU. Among its brands, HOKA, which was acquired in 2012 for around $1.1 million, has emerged as a particularly significant asset.
The acquisition has proven highly successful, with HOKA projected to generate over $2 billion in sales, a goal articulated by Deckers’ CEO and President, Dave Powers last year. In the first quarter of fiscal 2025, which ended June 30, the company reported a 22% increase in revenue, driven primarily by HOKA, whose net sales rose by 29.7% to $545.2 million, up from $420.5 million. EPS for the quarter reached $4.52, an impressive 88% increase, attributed to a higher gross margin resulting from a favorable sales mix skewed toward HOKA’s premium-priced shoes.
For the full year, Deckers Outdoor (NYSE:DECK) forecasts net sales of approximately $4.7 billion, representing a 10% rise from the prior year, with projected earnings per share growth between 2% and 5%. Supporting these fundamentals is a strong balance sheet, featuring $1.4 billion in cash and no financial debt.
11. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 52
Cramer discussed Colgate-Palmolive Company (NYSE:CL), noting that the market has an excessive affection for the company.
“Finally on Friday, we got Colgate-Palmolive. And here’s one where I stand, it doesn’t even matter where I stand… It’s kind of an unnatural thing, frankly. The Street loves Colgate Palmolive. I think that the love is way overdone, but that does not matter. Colgate always wins. Kind of drives me crazy. I just want to find out what people really think that they love it so much, but it doesn’t matter. It’s inscrutable.”
Colgate-Palmolive (NYSE:CL) is a prominent manufacturer and seller of consumer products, offering a range of well-known brands including Colgate, Protex, Sanex, Meridol, Softlan, and Ajax. With a rich history of consistent performance, the company has an impressive 61 years of dividend increases, highlighted by a recent 4.2% rise in its quarterly dividend to $0.50, marking the 62nd consecutive annual increase. The dividend is payable on November 15 to shareholders of record on October 18 and the dividend yield is 2.01%, as of October 21.
In its second-quarter results, Colgate-Palmolive (NYSE:CL) achieved gross margin expansion for the fourth straight quarter, along with double-digit growth in operating profit, net income, and earnings per share. The company raised its guidance for organic sales and Base Business earnings per share for 2024, maintaining a net sales growth expectation of 2-5%.
The adjustment is owed to an increased organic sales growth outlook of 6-8%, up from the previous 5-7% forecast, despite anticipated foreign exchange challenges. Additionally, the company continues to expect double-digit growth in earnings per share on a GAAP basis, while the revised Base Business earnings per share growth is now expected to be between 8-11%, compared to earlier projections of mid to high-single-digit growth.
10. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 54
Cramer commended the CEO of International Business Machines Corporation (NYSE:IBM), saying:
“IBM also reports after the close, and I bet we’ll get another beat and raise quarter. Why? Because it’s become a beat-and-raise machine under CEO Arvind Krishna. Enough said.”
International Business Machines (NYSE:IBM) has long been a pioneer in the field of artificial intelligence, tracing its innovations back to the 1970s with breakthroughs such as the first speech recognition system and a programming language for self-learning robots. Recent analysis from IFI Claims highlighted that IBM made 1,591 AI-related patent applications, surpassing competitors like Google by a significant margin.
In line with a more focused patenting strategy announced last year, the company has concentrated its efforts on five key areas, with AI being a primary focus for future innovation. Since Arvind Krishna took over as CEO in 2020, the company has aligned its objectives around AI and cloud technologies, a direction that has proven effective as demand for AI solutions has surged over the past year.
In the second quarter, the company’s software division, which includes cloud and AI sales, generated revenue of $6.7 billion, reflecting a 7% increase. The division accounted for 43% of the company’s total revenue of $15.8 billion in the same period.
The introduction of the Watsonx generative AI platform in 2023 marked another significant step for International Business Machines (NYSE:IBM), securing over $2 billion in contracts shortly after its launch. While software is a vital component of the company’s offerings, CEO Arvind Krishna noted that the business is balanced, with approximately one-quarter coming from software and three-quarters from consulting engagements. Krishna emphasized that the company’s plan in AI positions the company well for future growth, as the technology continues to evolve and gain traction in the market.
9. RTX Corporation (NYSE:RTX)
Number of Hedge Fund Holders: 54
Cramer previously called RTX Corporation (NYSE:RTX) a winner and said that he expects it to continue being one.
“Tuesday’s also a real big aerospace morning with numbers from RTX and GE Aerospace. Now, both stocks have been flying high. I bet that continues after the report, and most likely, they will raise estimates. These are two fantastic, well-run companies.”
RTX Corporation (NYSE:RTX) delivers a diverse range of systems and services tailored to commercial, military, and government customers. The company specializes in producing aircraft engines, aerospace technologies, and advanced capabilities for threat detection. In its second quarter, it reported adjusted EPS of $1.41, reflecting a 9% increase from the same period last year.
Revenue reached $19.7 billion, marking an 8% rise year over year, and a 10% increase on an organic basis after accounting for foreign exchange fluctuations and divestitures. Both of the company’s segments dedicated to commercial aircraft components exhibited growth. Collins Aerospace experienced a 10% increase in sales and a 24% rise in operating profits. Meanwhile, Pratt & Whitney saw its sales grow by 19%, with profits skyrocketing by 136%.
RTX Corporation (NYSE:RTX) management demonstrated optimism regarding future performance by adjusting the 2024 organic sales growth forecast to a range of 8% to 9%, up from an earlier midpoint estimate of 7.5%. Additionally, the company expects full-year earnings per share to fall between $5.35 and $5.45, which is a 7% increase from 2023 and surpassing the previously projected range of $5.25 to $5.40.
8. T-Mobile US, Inc. (NASDAQ:TMUS)
Number of Hedge Fund Holders: 64
Cramer mentioned T-Mobile US, Inc.’s (NASDAQ:TMUS) strong run and recommended buying half the position before the quarterly report and the other half afterward.
“One serial beat and raiser is T-Mobile, and they report after the close. Can they keep up the winning streak? T Mobile’s had such an amazing run… Maybe buy half before the quarter reports and then half after.”
T-Mobile US (NASDAQ:TMUS) is a significant player in the mobile communications sector as it provides a range of services that includes voice, messaging, and data offerings. In addition to its communication services, the company offers an extensive range of wireless devices and accessories, and financing options through equipment installment plans further complement its offerings.
Recently, the company announced a significant increase in its dividend, which will now stand at $0.88 per share each quarter, marking a substantial 35% rise. Additionally, management has indicated expectations of consistent double-digit growth in dividends over the coming years.
On October 21, Citi analyst Michael Rollins raised the price target on T-Mobile US (NASDAQ:TMUS) to $254 from $210 and kept a Buy rating as the firm prepares for the third-quarter earnings report. The revision suggests a strong confidence in the company’s ability to capture market share in areas with lower penetration. The analyst emphasized that the company’s focus will likely be on balancing volume and average revenue per user (ARPU) to sustain growth in service revenue.
Furthermore, its venture into the Fiber business is viewed as a promising avenue for improving long-term financial performance, contributing to a steady revenue trajectory and improved annual EBITDA growth.
7. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 68
Cramer said that The Coca-Cola Company (NYSE:KO) is well run and credited the success to its CEO. Here’s what the host of Mad Money had to say:
“… Sometimes companies can practically print money simply because they’re so well run. Take Coca-Cola. Under the steady hand of James Quincey, Coca-Cola has become a low-risk juggernaut with a solid dividend, definitely a stock that is worth owning.”
Coca-Cola (NYSE:KO) is a leading global manufacturer of beverages, offering a diverse range of nonalcoholic drinks, which include soft drinks, water, tea, juice, and plant-based beverages. In addition to its extensive drink portfolio, the company supplies beverage concentrates and syrups to various retailers, such as restaurants and convenience stores. The company is dedicated to returning value to shareholders, evidenced by 62 consecutive years of increasing dividends.
Recently, it paid out its quarterly dividend of 48.5 cents per common share. As of October 21, the stock has a dividend yield of 2.78%. It is worth noting that Berkshire Hathaway owns 400 million shares of stock and the holding makes up over 9% of the firm’s portfolio, as per Insider Monkey’s database. It ranks as Berkshire’s fourth-largest public equity investment. Berkshire has held its stake in the company for more than 30 years.
Coca-Cola (NYSE:KO) revised its outlook for the year, attributing this adjustment to rising global demand for its beverages, particularly observed in the second quarter. For 2024, the company forecasts organic revenue growth between 9% and 10%, an increase from an earlier forecast of 8% to 9%.
Furthermore, the expectations for comparable earnings growth have been adjusted to a range of 5% to 6%, up from the previous estimate of 4% to 5%. CFO John Murphy emphasized that this updated guidance is a result of the positive momentum generated in the first half of the year and reflects confidence in executing plans for the latter part of the year.
6. General Motors Company (NYSE:GM)
Number of Hedge Fund Holders: 72
Cramer has highlighted General Motors Company’s (NYSE:GM) substantial buyback program and praised the CEO, Mary Barra.
“In the morning, we have General Motors, one of the cheapest stocks in the entire S&P 500. The traders believe GM’s future earnings will collapse or would not have such a low price-to-earnings multiple, PE multiple. I think it’s a bargain, even as it may be hurt by tariffs on Mexican-made cars if Donald Trump wins in November.”
General Motors (NYSE:GM) develops, manufactures, and markets a wide range of vehicles, including trucks, crossovers, cars, and vital automotive components. On October 13, it was reported that Republican U.S. presidential candidate Donald Trump suggested the possibility of imposing tariffs exceeding 200% on vehicles imported from Mexico. In an interview, he expressed intentions to prevent the sale of cars from Mexico into the United States, stating, “I’ll put a number where they can’t sell one car.”
Reuters reported on October 16 that the company and Taiwanese tech giant Foxconn, plan to transition production from Asia to Mexico, a move highlighted by the nation’s deputy economy minister.
Additionally, on October 10, General Motors (NYSE:GM) reported significant progress in the Chinese market, with deliveries exceeding 426,000 vehicles in the third quarter of 2024. It was a sequential growth rate of 14.3%, the highest since the third quarter of 2022.
Additionally, sales of new energy vehicles, which include battery electric vehicles and plug-in hybrids, surpassed those of internal combustion engine vehicles for the first time in China. With over 224,000 units delivered, new energy vehicles constituted 52.7% of the company’s total Q3 deliveries in the region, which was a remarkable 60.7% increase year-on-year.
5. Danaher Corporation (NYSE:DHR)
Number of Hedge Fund Holders: 83
Danaher Corporation (NYSE:DHR) is one of Cramer’s favorites. He acknowledged that he has some concerns about it while remarking that it is an important position.
“Now, one of my Charitable Trust’s favorite companies is Danaher. It’s an amazing life sciences conglomerate that I think might be ready to return to its old greatness. The stock’s been doing nothing for ages, but then again, Danaher can’t outrun its clients and its clients are new young biotechs with deep pockets. Unfortunately, that’s a scarce commodity in this environment.
Still, there are enough young biotechs and of course, just older healthcare companies that are out there that I bet Danner can tell a story of an expanding client base and growing orders. It’s a very important position… I’m obviously on tenterhooks about it. I am concerned because it has not done well.”
Danaher (NYSE:DHR) specializes in designing and manufacturing a diverse range of professional, medical, industrial, and commercial products and services on a global scale. The company’s focus is on advancing the development and production of therapeutics, while also providing essential analytical tools, diagnostic products, and laboratory automation solutions across multiple sectors.
Management’s expectation shows a core revenue decline in the low single digits for the full year, along with an anticipated adjusted operating profit margin of around 29%. CEO Rainer Blair has previously highlighted the positive momentum within the bioprocessing business and noted market share gains for the molecular diagnostic testing division, particularly through its Cepheid brand.
On October 1, The Fly reported that Evercore ISI analyst Vijay Kumar raised the price target on Danaher (NYSE:DHR) to $278 from $275 and maintained an Outperform rating. In the MedTech sector, utilization rates remained favorable entering the third quarter, and the outlook for capital expenditures next year appears to be strong.
Within the life sciences tools arena, bioprocessing trends are expected to improve in the latter half of the year, though discussions continue regarding the instrument outlook and potential impacts from stimulus efforts in China, especially following the recent stock performance in this sector, as per the MedTech and Tools Q3 preview.
4. Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Holders: 84
Talking about how ASML’s poor forecast shook up the semiconductor industry, Cramer discussed Lam Research Corporation (NASDAQ:LRCX).
“… Now, Lam Research is a much better company than ASML. I think it’ll tell a good story. I think it’s got a healthy buyback. Very risky, though. If it’s just only because expectations have been lowered here, it might work. But the problem with Lam is, is that what happens if ASML is at all right, then Lam won’t pop. But that’s not that big a risk.”
Lam Research (NASDAQ:LRCX) designs, manufactures, markets, refurbishes, and services semiconductor processing equipment used in the production of integrated circuits. In its annual filing, the company identified Micron, Samsung, SK Hynix, and Taiwan Semiconductor Manufacturing as its primary customers, highlighting its strong ties within the semiconductor industry.
According to McKinsey & Company, global investments in semiconductor fabrication facilities are projected to reach around $1 trillion by 2030. Additionally, much of this investment is focused on Asia and the United States. During the August earnings conference call, CEO Timothy Archer discussed the potential growth driven by artificial intelligence applications.
As the use of AI expands, particularly with inferencing at the edge, there is an expected rise in demand for low-power DRAM and NAND storage in enterprise PCs and smartphones. This trend aligns with the company’s capabilities, suggesting that investments in AI-enabled edge devices will significantly benefit the company.
In May, Lam Research (NASDAQ:LRCX) announced a 10-for-1 stock split alongside a $10 billion share buyback program that adds to existing repurchase authorizations. It allows for repurchases in both public and private markets, including the use of derivative contracts and structured agreements, with no fixed termination date, although it may be suspended or discontinued at any time.
3. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 85
Cramer recently talked about Tesla, Inc. (NASDAQ:TSLA) and mentioned that he would not bet against Elon Musk, adding that Musk will figure it out.
“After the close Wednesday, it’s mega MAGA man, Musk and the Tesla show. People didn’t like his recent self-driving presentation, so I think he’s going to try harder to deliver a really good set of Tesla numbers because they have been lowered and lowered and lowered so you can beat them. That’s when Elon Musk does his best work.”
Tesla (NASDAQ:TSLA), known for its electric vehicles, is currently navigating a challenging environment in the automotive market. Demand for electric vehicles has softened as consumers increasingly opt for more affordable gas-powered cars, influenced by economic factors such as elevated interest rates.
On October 15, Reuters reported a significant development for the company, as it moved closer to its goal of doubling production capacity at its Berlin facility. The local environment ministry granted approval for the initial phase of this expansion, which includes plans for storage facilities, a battery cell testing laboratory, and logistics areas. The construction will occur on land already owned by the company, with the company having submitted its application for expansion in July 2023.
The first changes are expected to be operational in the first half of 2024. However, the plant’s director, Andre Thierig, expressed in August that the company would hold off on further investments until there are signs that demand for electric vehicles in Europe is recovering.
Despite some negative feedback surrounding Tesla’s (NASDAQ:TSLA) recent ‘We, Robot’ event, there were also encouraging reactions from certain stakeholders, according to Barron’s. Tasha Keeney, the director of investment analysis at ARK Invest, expressed optimism about comments made by CEO Elon Musk regarding the costs of robotaxis. Musk stated that these costs could be as low as 20 cents per mile, significantly cheaper than the expenses associated with owning and operating a traditional vehicle. Keeney believes that the company can meet its timeline for launching these services in 2025.
Keeney noted that Tesla’s (NASDAQ:TSLA) extensive data collection from its customer vehicles provides a competitive advantage over rivals like Waymo, which lack similar data scale and manufacturing capabilities. Keeney also added that while the company may not have been the first to introduce an autonomous driving platform, research suggests it is likely to be the first to scale such technology effectively.
2. GE Aerospace (NYSE:GE)
Number of Hedge Fund Holders: 86
Cramer previously talked about GE Aerospace (NYSE:GE) and commented that due to significant production challenges faced by Boeing and Airbus, there is a growing need for airplanes to have a longer lifespan. He added that consequently, the company’s engine service division is “on fire”.
“Tuesday’s also a real big aerospace morning with numbers from RTX and GE Aerospace. Now, both stocks have been flying high. I bet that continues after the report, and most likely, they will raise estimates. These are two fantastic, well-run companies.”
GE Aerospace (NYSE:GE) is involved in designing and manufacturing engines for both commercial and military aircraft, as well as providing integrated engine components, electric power systems, and mechanical aircraft systems. According to management, as the year progressed, the company showed significant financial growth, with earnings and free cash flow both increasing by over 50%. The company achieved a remarkable free cash flow conversion rate of nearly 120%, highlighting its operational efficiency.
Building on these strong results and positive momentum, the company raised its profit and cash flow guidance. Revenue growth is now expected to rise in the high-single digits because of a decrease in equipment revenue within the Commercial Engines & Services (CES) segment. The revised expectations show that CES equipment revenue will increase in the high single to low double digits, a shift from previous forecasts of high-teens growth.
In terms of services, CES is forecasted to see growth in the mid-teens, leading to overall CES growth projected at low-double digits to mid-teens. Regarding operating profit, GE Aerospace (NYSE:GE) now expects a range between $6.5 billion and $6.8 billion, marking an increase of $250 million at the midpoint from earlier forecasts, accompanied by margin expansion.
The improvement is primarily driven by CES, with its operating profit now expected to fall between $6.3 billion and $6.5 billion, up from the previous estimate of $6.1 billion to $6.4 billion. Additionally, the company has raised its free cash flow guidance to a range of $5.3 billion to $5.6 billion.
1. Vertiv Holdings Co (NYSE:VRT)
Number of Hedge Fund Holders: 92
Cramer recently called Vertiv Holdings Co (NYSE:VRT) a “pure-play’ and said:
“Data centers remain one of the hottest themes in the market, and if you’re looking for pure-play, go with Vertiv, which makes electrical equipment for these warehouses full of servers. Now that said, this stock is so red hot that it might not be able to rally on earnings unless it raises its forecast to unfathomable levels. Then again, Vertiv’s business is so strong, it’s so strong that unfathomable might be fathomable.”
Vertiv Holding (NYSE:VRT) is engaged in creating and maintaining essential digital infrastructure technologies and lifecycle services tailored for data centers, communication networks, and a range of commercial and industrial applications. After reporting a strong performance in the first half of the year, it gave an upward adjustment to its full-year sales guidance by $50 million, with $75 million of this growth attributed to organic development.
Alongside this, the company raised its full-year adjusted operating profit forecast by $85 million, now aiming for $1.435 billion. The increase is linked to a rise in sales volume and improved variable contribution margins anticipated in the latter half of the year, driven by improved productivity in both procurement and manufacturing processes.
Additionally, the company also adjusted its full-year guidance for operating margins, now projecting an adjusted operating margin of 18.7% at the midpoint. It is an increase of 100 basis points from previous estimates and 200 basis points above initial forecasts made during the November investor conference. Furthermore, the company’s forecasted adjusted diluted EPS for 2024 is set at $2.50 at the midpoint, representing over 40% growth compared to 2023, largely due to an increase in adjusted operating profit.
Vertiv Holding (NYSE:VRT) has been making significant strides in liquid cooling technology, positioning itself as an alternative to conventional energy management practices in data centers. In September, the company announced a significant expansion of its manufacturing capabilities in North America with the opening of a new facility in Pelzer, South Carolina. The site will add 215,000 square feet of production space and is expected to create up to 300 skilled jobs in the region.
The Pelzer facility will focus on the production of various infrastructure solutions, including integrated modular systems and modular power solutions, capitalizing on the company’s extensive portfolio of power, cooling, and IT infrastructure technologies designed for data centers.
While we acknowledge the potential of Vertiv Holdings Co (NYSE:VRT) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VRT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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