CVS Caremark was off about 4 percent on Thursday on disappointing guidance for 2011. The culprit? Caremark, the company’s pharmacy benefits management division. But as Cramer pointed out during “Stop Trading,” competitors in the business aren’t having the same problems.
CVS said that it expects profits at Caremark to shrink further this year in part because of costs related to a new multiyear contract with Aetna . The company also warned that other issues affecting Caremark's results include lower payments from pharmacy benefits program for federal employees, less profitable contract renewals and expenses related to cost cuts. It said its adjusted profit per prescription will also continue to decline, moving closer to the levels reported by Caremark's competitors.
Cramer didn’t see these problems at rival Medco Health Solutions , though. Nor are rivals in CVS’s other business—retail drugstores—hurting, either. If they were, stocks like Walgreen wouldn’t be up. Cramer blamed the problems on CVS specifically and not the industries within which it operates.
CVS is the “poster boy for poor execution,” Cramer said, adding, “They’ve got to get it together.”
Cramer thinks MHS and WAG deserve to be 10 percent higher.
Vulcan Materials and Allergan looked like they might open down 5 percent to 10 percent, with short sellers putting pressure on the stocks, the longs ready to sell and news reports looking bad. But their conference calls renewed investors’ faith in both companies, Cramer said, as their stories were “good” and their outlooks “even better.”
VMC finally spoke of a turn in its aggregates business, which means positive things for housing and roads—two sectors that were “decimated,” Cramer said. Meanwhile, Allergan looks poised to reach $80 a share on the strength of its Lap-Band weight-loss device and new indications for Botox. The heavy spending the company did on these two products this quarter should result in what Cramer described as a “magnificent” Q2 and the rest of 2011.
“I think that is the fastest-growing major drug company in the world,” Cramer said.
The “Mad Money” host also reiterated his call that a bull market in trucks is taking place. He said it was in the fifth month of what should be a three-year cycle.
Lastly, Newmont Mining’s purchase of Fronteer Gold and its mines shows how short the supply is of the precious metal, Cramer said. This feeds into his thesis that it’s simple supply and demand, and not the U.S. dollar or interest rates, that’s driving gold prices higher. He had predicted that those prices would decline throughout January but start to climb again this month. That’s still his outlook now.
“I just feel like that gold has had its time of rest, and now it’s ready,” Cramer said.
--The Associated Press contributed to this report.
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