Cramer’s Game Plan for Tuesday
Aluminum maker Alcoa will kick off the third-quarter earnings season when it reports after Tuesday’s closing bell.
Alcoa's earnings report is the highlight of Jim Cramer's "Game Plan" for Tuesday.
“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, Cramer 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.)
Speaking of earnings, 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.)
Meanwhile, Federal Express will hold an analyst meeting on Tuesday and Wednesday. Cramer thinks the package delivery company might actually have something positive to say, but didn’t specify what it might be.
(Related: FedEx Says Economy Is Worsening, Cuts Outlook.)
“We have plenty of negative analyst commentary going into [the meeting], so even some tepidly positive projections could be welcomed warmly,” Cramer said.
—Reuters contributed to this report
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