Earnings Lessons Amidst a Macro-Driven Market
Research Director, Mad Money
Men's Wearhouse (MW)
After reporting a disappointing quarter last Wednesday after the close, Men's Wearhouse's stock dropped 18 percent. On Thursday, Cramer offered a mea culpa outlining the quarterly miss.
Ultimately, this promotional suit retailer is a name that should have been avoided into earnings, given the dismal jobs number we got the previous Friday. A decline in suit sales along with a decline in the sales at K&G, the company’s off-price brand, reflects some of the macro concerns we reflected by the labor report. Men’s Wearhouse’s shift to a younger customer base with more sportswear (a more risky business) along with competitive pressures introduce additional question marks.
What to do now?
When a stock misses this significantly with no real comments addressing the situation, it gets placed in the penalty box for at least one quarter to show it can turn itself around. Men’s Wearhouse defends that they like the way they look? Well, they didn’t guarantee it. This name is in show-me mode.
After reporting last Thursday before the open, Navistar'sstock fell 14 percent. This company has reported multiple disappointing quarters and continued to fall this week after an United States Court of Appeals ruled the company can no longer sell engines that don’t comply with environmental standards.
While many value arguments have been made for the name, we know there remain truck industry growth headwinds and Cummins is a better executor. To have some exposure to the truck cycle without committing a pure play, take a look at Eaton which will also benefit from the integration of its recently announced acquisition of Cooper Industries and sports an attractive dividend yield.
Lululemon has had a high flying stock, but it fell 9 percent after its report last Thursday before the open gave disappointing guidance. The stock has traditionally been very volatile into earnings, particularly given the high expectations associated with the yoga and other athletic apparel junior growth name.