Jim Cramer Breaks Down Apple (AAPL), Caterpillar (CAT) and American Airlines Group's (AAL) Earnings

NEW YORK (TheStreet) -- TheStreet's Jim Cramer says investors expected nothing from Apple  (AAPL) and Caterpillar  (CAT) when the two companies reported their earnings, but both companies surpassed expectations and the stocks traded higher on Thursday.

American Airlines Group  (AAL), though, had greater expectations and the stock was up Wednesday ahead of the quarterly report on Thursday morning. Cramer says the market is in a situation wherein stocks with any significant expectations are getting killed even if they beat analysts' estimates.

Cramer says "Heaven help the ones" that only meet expectations, such as ServiceNow  (NOW) and Celgene  (CELG), which are getting crushed.

Must Watch: Jim Cramer on Caterpillar, American Airlines and Apple Earnings

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Separately, TheStreet Ratings team rates APPLE INC as a "buy" with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate APPLE INC (AAPL) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AAPL's revenue growth has slightly outpaced the industry average of 4.7%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Although AAPL's debt-to-equity ratio of 0.13 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.23, which illustrates the ability to avoid short-term cash problems.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • 41.65% is the gross profit margin for APPLE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.69% is above that of the industry average.
  • APPLE INC's earnings per share improvement from the most recent quarter was slightly positive. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, APPLE INC reported lower earnings of $39.63 versus $44.16 in the prior year. This year, the market expects an improvement in earnings ($42.74 versus $39.63).
  • You can view the full analysis from the report here: AAPL Ratings Report

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Separately, TheStreet Ratings team rates CATERPILLAR INC as a "buy" with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CATERPILLAR INC (CAT) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Machinery industry average. The net income increased by 43.9% when compared to the same quarter one year prior, rising from $697.00 million to $1,003.00 million.
  • Net operating cash flow has increased to $2,580.00 million or 30.36% when compared to the same quarter last year. In addition, CATERPILLAR INC has also modestly surpassed the industry average cash flow growth rate of 27.90%.
  • CATERPILLAR INC has improved earnings per share by 48.1% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CATERPILLAR INC reported lower earnings of $5.75 versus $8.49 in the prior year. This year, the market expects an improvement in earnings ($5.90 versus $5.75).
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 17.2%. Since the same quarter one year prior, revenues fell by 10.4%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: CAT Ratings Report

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Separately, TheStreet Ratings team rates SERVICENOW INC as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate SERVICENOW INC (NOW) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally high debt management risk and feeble growth in its earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 144.0% when compared to the same quarter one year ago, falling from -$9.93 million to -$24.23 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Software industry and the overall market, SERVICENOW INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The debt-to-equity ratio of 1.05 is relatively high when compared with the industry average, suggesting a need for better debt level management. Regardless of the company's weak debt-to-equity ratio, NOW has managed to keep a strong quick ratio of 2.26, which demonstrates the ability to cover short-term cash needs.
  • SERVICENOW INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, SERVICENOW INC reported poor results of -$0.54 versus -$0.31 in the prior year. This year, the market expects an improvement in earnings (-$0.04 versus -$0.54).
  • The gross profit margin for SERVICENOW INC is currently very high, coming in at 70.02%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -19.34% is in-line with the industry average.
  • You can view the full analysis from the report here: NOW Ratings Report

STOCKS TO BUY: TheStreet's Stocks Under $10 has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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