Jim Cramer is eagerly awaiting the third-quarter earnings season, which begins Tuesday with a report from aluminum maker Alcoa.
Being as aluminum is used in many products across many industries, Alcoa is often considered an economic bellwether. In turn, its results typically set the tone not only for the markets, but for all of earnings season.
“While the company’s operating surprisingly well, earnings will be hurt by a glut of high cost Chinese aluminum,” Cramer said. “The Chinese don’t want to shut down their dirty, polluting, expensive plants because it would involve huge layoffs. But they sell aluminum well below cost and it kills all of the other producers.”
Nevertheless, the “Mad Money” host noted Alcoa sells into “some very hot markets,” such as the aerospace and automobile industries. It also sells to the construction industry, which has been struggling.
“So without big construction and with huge exposure to the sagging European market, as well as the awful Chinese market, Alcoa’s going to be hard pressed to get to the mid-teens, where I think it would be if China weren’t producing 5 million more tons of aluminum than it needs,” Cramer said.
(Read More: Alcoa's Third-Quarter Profit Expected to Fall.)
Meanwhile, restaurant operator Yum! Brands will also deliver its quarterly results Tuesday.
Yum! operates the Kentucky Fried Chicken restaurant chain, which Cramer noted does a sizable amount of business in China. Being as China’s economy has slowed, he worries KFC might not have sold that much chicken. Still, he still likes the stock in the low $60s.
(See: Yum's China Performance Watched.)
On Wednesday, discount retailer Costco Wholesale will announce its earnings results before the opening bell.
The Issaquah, Wash.-based company recently reported better-than-expected September sales at stores open at least a year, helped by higher gasoline prices and stronger dollar. Its same-store sales rose by 6 percent while some analysts expected an increase of 5.7 percent, including the impact of fuel prices, according to published reports.
“Those terrific September numbers … got me thinking that I am too negative about this stock,” Cramer said. “But if there’s one point I must never stop driving home, it’s that owning expensive stocks is risky.”
In turn, Cramer recommended investors to be cautious with Costco’s stock and consider taking profits.
Grocer Safeway will report earnings on Thursday. To Cramer, this food store’s stock is a “falling knife.”
“So many people have tried to call the bottom in this stock and all they have is thousands of shopping cart wheel ruts on their backs,” Cramer said. “I’m thinking that Safeway will one day be like the checkout line — ten points or less.”
When it comes to grocery store stocks, Cramer noted that he prefers Whole Foods Market.
After Thursday’s closing bell, Cramer will look for earnings results from JB Hunt Transport Services.
“JB Hunt can move the transport index and the transport index can move the overall market by confirming any advance,” Cramer said, adding that unlike Federal Express or United Parcel Service, the U.S.-based trucker is not greatly impacted by economic slowdowns in Asia or Europe.
(Related: FedEx Says Economy Is Worsening, Cuts Outlook.)
JPMorgan Chase, which Cramer currently considers one of the best international banks, will report earnings Friday. Cramer has been critical of CEO Jamie Dimon lately, but still thinks the bank could report an “astonishing number.” Its stock has made a huge move higher lately, too, so Cramer recommends investors consider taking profits.
Finally, Wells Fargo will also announce earnings Friday. In Cramer’s opinion, Wells Fargo is one of the best domestic banks right now.
“This stock has done nothing of late,” Cramer said. “I think it can gallop on the strong number that I’m expecting.”
—Reuters contributed to this report
When this story was published, Cramer's charitable trust owned JPMorgan Chase and Wells Fargo.
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