TheStreet.com's Jim Cramer says eventually, the credit markets will thaw, and this one will take off like a rocket.
Cheap isn't always relative. Consider the case of Shaw Group (NYSE: SGR) (Cramer's Take), the infrastructure play with the nuclear bent that has tons of business around the world building nuke plants that are competitive with oil and nat gas even at these prices, but obviously are much better for the environment.
Shaw's doing great -- big order book, no cancellations or stretch-outs (unlike ABB (NYSE: ABB) (Cramer's Take) or McDermott (NYSE: MDR) (Cramer's Take)), and most important, its stock is trading a mere dollar and a half above its cash.
It's absurd, as the CEO told me last night on a pre-empted edition of the 6 p.m. "Mad Money." The valuation makes no sense.
This post is part of a series in which TheStockAdvisors.com asked financial experts to name their top stock pick if McCain or if Obama wins the election.
"John McCain has said that nuclear power must be part of a plan to address climate change and reduce our dependence on foreign oil; to benefit from this plan, buy Shaw Group (NYSE: SGR), which constructs and maintains nuclear power plants," says Paul Tracy in his Street Authority Market Advisor.
"Today, nearly half of U.S. electricity is created via conventional coal-fired plants. This made sense for us for decades -- coal is so cheap and plentiful here that the United States is often referred to as the Saudi Arabia of coal.
"However, in the past few years, the tide of public sentiment has shifted against the energy source. Primarily this is due to the emissions created by burning coal for electricity.
"In addition to the well known release of carbon dioxide, coal emissions also contain traces of mercury. On top of that, the rise of China and other emerging markets has led to higher costs for coal.
"So with a public that is increasingly interested in alternative sources of electricity and a president who is committed to increasing nuclear power usage, the companies that build and maintain nuclear plants sit in the perfect position to benefit.
"In particular, I think Louisiana-based Shaw Group is a stock to watch. SGR's largest end market is the construction and maintenance of power plants, including both plants fired by fossil fuels and nuclear facilities.
"The company also owns a 20% stake in Westinghouse Electric, one of the world's leading designers and builders of nuclear power plants.
Readers of this space know that in addition to oil / oil services, one of my preferred sectors is: infrastructure / public services. That's because despite the U.S. economic slowdown, global growth proceeds at a better-than-adequate pace, with infrastructure work playing a significant role. And with the aforementioned in mind, The Shaw Group is worth an evaluation.
The Shaw Group (NYSE: SGR) is a leading supplier of industrial piping systems, including engineering, pipe erection and construction / maintenance services.
Analysts really like the fact that Shaw Group has also positioned itself as one of the largest engineering and construction contractors for the power generation market and as a top environmental services company. Another positive: SGR's large geographic footprint.
This gigantic beat also serves to remind us of the big dichotomy. You are either in the energy and petroleum products game or you are in a lot of games that don't work.
It's not easy for these companies, some of which have lived off the duress of state and local governments, including Shaw (NYSE: SGR) (Cramer's Take) and to a certain extent Aecom (NYSE: ACM) (Cramer's Take) and URS (NYSE: URS) (Cramer's Take), to become oil-and-gas plays.
The only ones that have transcended it beside Fluor are Foster Wheeler (NASDAQ: FWLT) (Cramer's Take) and Jacobs Engineering (NYSE: JEC) (Cramer's Take), and the only reason you would really know that is longevity. I remember in the early 1980s when FLR and then FWC would compete directly for all of the huge projects after the second oil shock.
Here is a brief overview of some of Wednesday's earnings reports.
Alcoa Inc. (NYSE: AA): Fourth-quarter earnings soared 76 percent, boosted by the pending sale of the aluminum producer's packaging and consumer businesses. For the three months ended December 31, net income rose to $632 million, or 75 cents per share, from $359 million, or 41 cents per share, during the same period last year. Quarterly revenue fell to $7.39 billion from $7.84 billion last year, due to lower metal prices and the exclusion of results from a soft alloy extrusion business that is now part of a joint venture. Analysts surveyed by Thomson Financial had expected earnings of 33 cents per share on $6.92 billion in revenue. Shares rose in after-hours trading.
The Shaw Group Inc. (NYSE: SGR): The engineering, construction, and environmental contractor swung to a first-quarter profit on strong demand for fossil and nuclear power projects. For the three months ending November 30, Shaw earned $2.23 million, or 3 cents per share, compared to a year-ago loss of $12.3 million, or 15 cents per share. Revenue rose to $1.71 billion from $1.28 billion a year ago. Analysts surveyed by Thomson Financial had expected a profit of 49 cents per share on revenue of $1.68 billion. Shares fell 48 cents to $59.22.
Ruby Tuesday Inc. (NYSE: RT): The restaurant chain swung to a loss in its fiscal second quarter due to remodeling expenses and weak sales. For the quarter ended December 4, the company reported a loss of $10.4 million, or 20 cents per share, versus a profit of $16.7 million, or 28 cents per share, in same period of the previous year. Revenue fell about 5 percent to $320.9 million from $336.8 million last year. The earnings results matched the expectations of analysts polled by Thomson Financial, who had also expected revenue of $316.4 million for the quarter. Shares hit a multi-year low of $6.99 during the day.
TheStreet.com's Jim Cramer says there are some names that will work here, but they're a small slice of the total market pie.
Can someone, anyone, tell me why we can bank on this Fed? "The Fed has to cut 50 basis points or we are going to Dow 12,500."
Yeah, OK. I get it. Fed panicked and cut 50 last time we were shocked with a weak employment number. Maybe they will do it again.
But I look at it a different way. This Fed thinks it is smarter than all of us. It looks at ways to tinker to bring down the short-rates without attacking them head on. They are clever.
Despite a probable U.S. economic slowdown, global growth is proceeding at a better-than-adequate pace (so far), with infrastructure work playing a significant role, and that's good news for The Shaw Group.
The Shaw Group Inc. (NYSE: SGR) is a leading supplier of industrial piping systems, including engineering, pipe erection, and construction/maintenance services.
Analysts really like the fact that Shaw Group has also positioned itself as one of the largest engineering and construction contractors for the power generation market and as a top environmental services company. Analysts also like SGR's large geographic footprint.
Further, in general Wall Street expects 15%-20% revenue growth for fiscal year (FY) 2008, and 12%-15% for 2009, with adequate margins. The Reuters FY 2007/FY 2008 EPS consensus estimates for SGR are $2.44 to $3.41
The risks? Analysts are monitoring potential cyclical declines in markets of SGR's customers, overall cost containment, and the company's order backlog.
The First Call mean rating for SGR is: Buy [12 firms]. Mean 2008 target: $74.00 [high: $90, low: $65].
Stock Analysis: The Shaw Group is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from SGR's shares. Sell/Stop Loss if you were to purchase shares in this company: $44.
MOST NOTEWORTHY: Vodafone, Citrix Systems, STMicroelectronics, Symmetricom and Smith International were today's noteworthy upgrades:
JP Morgan upgraded shares of Vodafone Group (NYSE: VOD) to Overweight from Neutral, as they believe the company is benefiting from increased data sales.
Citrix Systems (NASDAQ: CTXS) was upgraded to Outperform from Market Perform at Friedman Billings. The firm's checks indicate that its clear communication strategy and a stronger technology platform behind the Enterprise and Platinum editions is spurring top line growth.
Baird upgraded shares of STMicroelectronics (NYSE: STM) to Outperform from Neutral based on new product cycle, multiple design wins, valuation, and strong Q4 guidance.
Cantor upgraded shares of Symmetricom (NASDAQ: SYMM) to Buy from Hold as they find the valuation compelling and are comfortable with Q1 estimates.
Calyon Securities upgraded Smith International (NYSE: SII) to Add from Neutral following its Q3 report and guidance.
OTHER UPGRADES:
Shaw Group (NYSE: SGR) was upgraded to Neutral from Sell at Goldman Sachs.
RBC Capital upgraded QLogic Corporation (NASDAQ: QLGC) to Outperform from Sector Perform.
Credit Suisse upgraded Amgen (NASDAQ: AMGN) and Weatherford (NYSE: WFT) to Outperform from Neutral.
"In any industry, one of the most sure-footed means of keeping profits steady is to own the suppliers of production means -- the old 'invest in the picks and shovels' approach," explains Neil George in Personal Finance.
He says, "For refiners, it means pipe, compressors, and the other bits used to crack crude into further profitable products." Here, he looks at a trio of favorites: Dresser-Rand Group Inc. (NYSE: DRC), Shaw Group Inc. (NYSE: SGR), and Tenaris (NYSE: TS).
"Dresser Rand is a leading global producer of highly specialized compressors and turbines, nearly 95% of which are used in the energy business. Compressors are used extensively in refineries; they're a crucial part of equipment used to process heavy and sour crude oils. The reactions used to process these more-complex crudes require generating extreme pressure and temperature.
"Dresser's products are also used to process Canadian oil sands. Dresser is also involved in some high-tech deepwater equipment work. The company has designed a subsea compressor and separator for Norway's Statoil.
"This equipment literally sits on the seafloor; the compressor helps to separate gas from oil and transport these commodities by subsea pipeline to distant floating production platforms.
What are the best energy investments for long-term investors? To answer this question, I surveyed 20 of the nation's leading financial newsletter advisors to find their current favorite ideas in the energy sector.
Interestingly, the advisors see the best opportunities in areas well beyond traditional oil firms; indeed, no one included in this report chose a major integrated oil company. Rather, the advisors have shown a preference for various oil services sectors, non-oil energy sources, and developing alternative technologies.
Others chose companies that make specific products needed by the oil & gas industries such as NATCO Group Inc. (NYSE: NTG), which makes a wide range of oil & gas processing systems; Dresser-Rand Group Inc. (NYSE: DRC), a maker of control systems; Gardner Denver Inc. (NYSE: GDI), which makes compressor and fluid transfer systems; Tenaris (NYSE: TS), a maker of pipes and tublar products and Schlumberger Ltd. (NYSE: SLB), the largest and most diversified of the oil services companies.
Engineering problems are rarely solved by approaching them from one direction only. That's why many firms and government agencies prefer to do business with engineering outfits big enough to bring expertise from a wide variety of disciplines to bear on their projects. There is a company in Baton Rouge with the size and diversity needed to handle the complex jobs.
The Shaw Group (NYSE: SGR) provides engineering, design, construction, and maintenance services to a variety of industrial markets. Clients include power generators (structural steel & engineering services), chemical manufacturers (research & development), government agencies (infrastructure construction) and general industrial concerns (environmental remediation services). Shaw also manufactures and distributes an extensive line of pipes and pipe fittings. The firm operates from nearly 200 locations around the world and employs 25,000.
Management pleased investors last week when it reported Q3 EPS of 60 cents (ex-items) and revenues of $1.6 billion. The Street had been looking for 34 cents and $1.54 billion. The stock popped on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the issue with four "strong buys," one "buy," five "holds" and two "sells." Analysts expect a 20% average annual growth rate through the next five years. The SGR Price to Sales ratio (1.09), Price to Free Cash Flow ratio (14.64), Sales Growth rate (30.54%) and EPS Growth rate (252.94%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 95 percent of the outstanding shares. The stock is used in calculating the S&P SmallCap 600 Index. Over the past 52 weeks, it has traded between $25.54 and $71.77. A stop-loss of $59.90 looks good here.
TheStreet.com's Jim Cramer says names in these two sectors now represent very little value and a lot of momentum, so know why you're buying them.
So many times last week I wanted to write about how some stocks just can't possibly go higher.
I thought that would be the case with these amazing levitators in agriculture. But then I listened to the Mosaic (NYSE: MOS) (Cramer's Take) conference call and was shocked into believing that the group simply isn't done because of the severe planting shortfalls vs. demands for next year for virtually every kind of crop.
I felt that same way when infrastructure exploded upward after Shaw (NYSE: SGR) (Cramer's Take) reported. But then I listened to that call and I heard that there are more than a trillion dollars' worth of projects out there, and the companies that have a shot at getting all this business tend to be $12 billion and smaller, and that really is just a mad-cap stock.
MOST NOTEWORTHY: Micron Technology (MU), Halliburton Co (HAL), Visual Sciences (VSCN) and Shaw Group (SGR) fill today's noteworthy upgrade list:
ThinkEquity upgraded shares of Micron Technology (NYSE: MU) to Buy from Accumulate, citing strength in the PC market. The firm believes Micron is well positioned to benefit from the potential secular uptrend in the DRAM market over the next 12 months.
Credit Suisse upgraded shares of Halliburton (NYSE: HAL) to Outperform from Neutral citing solid cyclical fundamentals, which should offset overly negative perceptions.
JMP Securities upgraded Visual Sciences (NASDAQ: VSCN) to Market Perform from Underperform based on the potential acquisition.
Citigroup upgraded shares of Shaw Group (NYSE: SGR) to Buy from Hold to reflect the company's robust backlog growth and changes in management...
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The Street had been looking for 34 cents and $1.54 billion. The stock popped on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
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