Cramer’s game plan: A pivotal earnings week

FAN Editor

For CNBC’s Jim Cramer, the stock market’s major averages routinely hitting record highs is anything but humdrum.

“But as much as I love it when stocks go higher, I recognize that the market can only go up as much the earnings let it, and next week we get a parade of numbers that will determine this rally’s fate,” the “Mad Money” host said.

Cramer knows the market can only continue to surge higher if companies keep delivering strong earnings results, which makes next week pivotal.

With that in mind, Cramer turned to the stocks and events he’ll be watching next week:

Netflix, the online entertainment streaming giant, will issue its earnings report on Monday. Analysts have grown increasingly bullish on the stock, which surged to an all-time high above $200 a share for the first time on Friday.

Cramer is usually wary of when stocks run ahead of earnings, which can cause declines in the wake of their reports. But he acknowledged Netflix’s unique position as a globally beloved company with scale that is central to the cord-cutting trend among cable customers.

“My prediction is that when Netflix reports after the close, the stock will either go up instantly by a huge amount or go up over time after a dip, because I think this company is worth more than its current $86 billion market cap,” Cramer said.

“Granted, Netflix the stock is no bargain on earnings,” he continued. “But as we’ve seen over and over and over again, the earnings are the wrong way to judge a company like this one that’s trying to take over the world and is succeeding pretty much everywhere it goes.”

Morgan Stanley: Cramer hopes the selling in bank stocks will have subsided by the time the next wave of big banks report Tuesday. With a large, stable wealth management business, Morgan Stanley should issue a good report, he said.

Goldman Sachs: While Goldman’s trading-oriented business has not seen a lot of action lately, Cramer knows the big bank is good at making money and likes its prospects.

UnitedHealth: Earlier this week, Cramer would have told investors to buy UnitedHealth because it would be the biggest winner if President Donald Trump’s plan to repeal and replace Obamacare failed.

But after the president eliminated key Obamacare subsidies Thursday night, the future of the health-care program became much less clear.

“Since UnitedHealth had already pulled out of the Obamacare exchanges, I’m tempted to say it’s a buy into weakness,” Cramer said. “However, we really don’t know. The situation’s gotten murky. So I’d rather wait until we get more information.”

IBM: The company will report earnings after markets close, and Cramer said the technology multinational must address its revenue declines for investors. The “Mad Money” host said the company might believe that, if it can deliver on growth in some strategic initiative, it may fall back into favor.

“I think IBM’s mistaken if it believes that Wall Street will embrace a company with no revenue growth quarter after quarter,” Cramer said. “[If] you give a downbeat projection, the stock can go still lower if the company only meets that downbeat projection rather than beating it.”

American Express: Cramer expects a good earnings report from American Express, which has once again become a Wall Street darling after some time in the doghouse.

That said, the stock seems to have baked in a strong report, so Cramer suggested investors stay away from the hot-headed stock and vie for the “better-run” MasterCard or Visa instead.

United Continental: With the airline cohort regaining strength, Cramer likes the outlook for United’s report.

“At $67, the stock is now down 14 straight points from its high,” he said. “I think it’s worth it as a flier, so to speak, because … I think it’ll catch up to its peers and I think it’s going to crush the estimates, frankly.”

United Rentals: After a destructive hurricane season that left parts of Florida, Texas and Puerto Rico ravaged, Cramer thinks this heavy equipment rental company’s earnings report will be particularly strong.

Verizon: Cramer doesn’t think Verizon’s earnings report will be as bad as its competitor AT&T’s because the company is not as “levered to the cord-cutting,” but overall, he’s not thrilled.

“I think it’s fine for income generation. I prefer something that offers both dividends and growth. Growth is hard to come by in that industry,” he said.

PayPal: For growth, Cramer suggested PayPal, which has been anointed with analyst upgrade after analyst upgrade in recent weeks.

The “Mad Money” host thinks the company can manage to beat the Street’s earnings estimates or, at the very least, give strong guidance about its peer-to-peer payment service, Venmo.

Schlumberger: Oil giant Schlumberger will issue its earnings report on Friday. In its last report, it said that while 2017 would remain difficult for the industry, 2018 would be better.

“This is a must-listen-to conference call,” Cramer said.

Procter & Gamble: An exhausting proxy battle between the consumer goods company and activist investor Nelson Peltz was narrowly won by Procter & Gamble on Tuesday.

“Will Procter be able to maintain better-than-average growth, as it’s been doing the last few quarters, or did the proxy take their eye off the ball? We’re going to find out,” Cramer said.

General Electric: With a struggling stock that has garnered bearish commentary from analysts, General Electric’s earnings report may just reaffirm the company’s ongoing troubles.

“Here’s the bottom line: Next week starts the meat of the order, and while I’d like to think that the record highs have become the norm, I know better. Without good earnings, we’ll find ourselves out of the streak and up the creek without a paddle,” the “Mad Money” host said.

Disclosure: Cramer’s charitable trust owns shares of Schlumberger and General Electric.

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