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Cramer's 'Mad Money' Recap: How to Play the Earnings Season

TheStreet.com Staff

Click here for an archive of Cramer's "Mad Money" recaps.

"We can't be too optimistic about this earnings season," Jim Cramer cautioned viewers of his "Mad Money" TV show Friday.

"The odds just simply don't favor investors during the few short weeks that most companies report their earnings," said Cramer, who then outlined his game plan for the next few weeks.

Cramer says the mortgage crisis will continue to weigh on the financial stocks. Even Goldman Sachs(GS Quote - Cramer on GS - Stock Picks), a stock which he owns for his charitable trust, Action Alerts PLUS, only saw a momentary boost when it reported strong earnings, he noted.

Cramer's outlook for technology stocks was equally lackluster. With the exception of Apple(AAPL Quote - Cramer on AAPL - Stock Picks), Cramer expects only estimate cuts and earnings misses from the tech sector. "I have no conviction that any tech company can beat their numbers," he said.

Even Cramer favorite Research In Motion (RIMM Quote - Cramer on RIMM - Stock Picks) should be sold on any lift.

In other sectors, Cramer was equally cautious. He still likes Costco (COST Quote - Cramer on COST - Stock Picks) and would possibly consider WalMart (WMT Quote - Cramer on WMT - Stock Picks) on a pullback, but sees little else in the retail sector worth buying.

He also was leary of mining and mineral stocks as well as the oil and gas stocks as both sectors will be hard pressed to impress Wall Street this quarter.

Cramer does see some positives in the markets, saying food and drug stocks should do well. He likes Schering-Plough (SGP Quote - Cramer on SGP - Stock Picks), another stock which he owns for his charitable trust, Action Alerts PLUS.

He also called Kellogg (K Quote - Cramer on K - Stock Picks), Pepsi (PEP Quote - Cramer on PEP - Stock Picks) and Coca-Cola (KO Quote - Cramer on KO - Stock Picks) safe bets.

And he reiterated buys on US Steel (X Quote - Cramer on X - Stock Picks), Potash (POT Quote - Cramer on POT - Stock Picks) and Textron (TXT Quote - Cramer on TXT - Stock Picks) and still expects great earnings from all three companies.

Get Pass the Negativity

For "Speculation Friday," Cramer highlighted AMAG Pharmaceuticals (AMAG Quote - Cramer on AMAG - Stock Picks), a biotech company that is working on a drug called Fermoxytol to help deliver iron to diabetic patients.

According to Cramer, Fermoxytol is a game-changing drug that is safer than current methods and more convenient and easier to administer, all of which translates to lower costs for healthcare providers.

Cramer expects the the drug, which is awaiting FDA approval, to be a shoe-in to receive that approval.

Cramer said that now is the time to buy AMAG because the negativity surrounding the company has gotten out of control.

Since September of 2007, the stock has come down considerably due to concerns surrounding its secondary stock offering. Merrill Lynch recently downgraded the stock, a move Cramer called "ill-timed" and "wrong."

"Take advantage of the false negativity," said Cramer.

A Natural Gas Winner

"There are few things safer than an unfairly beaten down stock that has a huge yield," says Cramer.

That's why he's recommending Enterprise Products (EPD Quote - Cramer on EPD - Stock Picks), a mid-stream energy company that manages natural gas pipelines.

Since Cramer first recommended EPD on May 8, 2007, the stock has been losing ground. However Cramer notes that with the company's 6.9% dividend yield, the losses are smaller than they appear. He suggested investors average down at the current price to lower their cost basis.

Cramer characterized the selling pressure in EPD as "forced selling," brought on by hedge and mutual funds forced to liquidate their positions in order to cover their redemptions.

"This artificial selling pressure will not last for long," said Cramer, noting that EPD has been one of the hardest hit stocks in the natural gas sector. "The selling in EPD has nothing to do with the fundamentals."

According to Cramer, 2008 will be a year of improvements for EPD, with the company increasing the volume of gas pumped through several of its pipeline, while it prepares to bring new pipelines and platforms online later in the year.

Bottom line: EPD's 6.9% dividend yield, along with its outlook for 2008, makes it "irresistible," he says.

An Energy Infrastructure Play

Cramer welcomed Randy Harl, President and CEO, Willbros Group (WG Quote - Cramer on WG - Stock Picks) to the show for an update on the company.

Despite weakness in Willbros' most recent quarter, he said the company maintains a backlog of over $1.3 billion. He said Willbros is now refocused on the strong North American market.

Harl, who remains very bullish on the state of energy infrastructure, dispelled concerns that short-term price swings in the cost of oil affect pipeline construction. "These are long-term contrracts," he explained.

Cramer agreed with Harl's outlook and gave Willbros a "buy, buy,buy."

Lightning Round

Cramer was bullish on Cal-Maine Foods (CALM Quote - Cramer on CALM - Stock Picks), Family Dollar Stores (FDO Quote - Cramer on FDO - Stock Picks), Procter & Gamble (PG Quote - Cramer on PG - Stock Picks), Quicksilver Resources (KWK Quote - Cramer on KWK - Stock Picks) and Microsoft (MSFT Quote - Cramer on MSFT - Stock Picks).

Cramer was bearish on Clearwire (CLWR Quote - Cramer on CLWR - Stock Picks), Sprint Nextel (S Quote - Cramer on S - Stock Picks), Ford Motor (F Quote - Cramer on F - Stock Picks), MEMC Electronics (WFR Quote - Cramer on WFR - Stock Picks), Citigroup (C Quote - Cramer on C - Stock Picks) and JC Penney (JCP Quote - Cramer on JCP - Stock Picks).

Want more Cramer? Check out Jim's rules and commandments for investing by clicking here.

For more of Cramer's insights during the Lightning Round, click here.