It’s not often that Cramer is stumped, but if it happens he does the same thing Homegamers should do when they’re considering a stock: homework. So when two callers asked him about Moog and Hill International recently, he hit the books.
Cramer studied the analyst research, the companies’ earnings releases, the Securities and Exchange Commission filings and the conference calls. Then he compared what he found with each company’s peers.
Moog, it turns out, earns 46% of its sales from the company’s industrial division. According to the conference call, products in that division are delivered in eight to 12 weeks, meaning Moog doesn’t get any long-term earnings visibility for the biggest part of its business. So even though Cramer liked the aircraft controls and space defense divisions, he said he couldn’t get behind the stock. Go with Raytheon for defense, he said, or Eaton for process controls.
Hill International is a project management and claims consulting company that works for the construction industry. It came public after a reverse merger, but Cramer said the firms behind it haven’t been that strong historically. On the other hand, HINT does have $100 million in cash and credit that should be used for acquisitions. So the 17th largest company in the business could become number 12, Cramer said.
The $380 million backlog might be too small, but Cramer did recognize that it’s growing: HINT’s 12-month backlog is up 40% year-over-year. And the stock looks cheap, trading at 21 times next year’s earnings with a 20% growth rate.
Cramer wouldn’t recommend either stock, he said, adding that Foster-Wheeler or Shaw Group would be better picks than HINT. But the decision, in the end, is up to each individual investor. “You can’t buy something before you know all about it,” Cramer said, “so follow my lead. Do your homework.”
Jim’s charitable trust owns Raytheon.
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