I know it doesn't matter at all. Right now we are so stuck on the banking problems and on the companies bleeding from higher energy prices that nobody cares about all of this cash, which will be used to shrink equity. They won't care because the banks, brokers and homebuilders, and the hobbled companies that use oil, have to issue so much equity that you can't see the effect of the equity shrinkage. But it will eventually matter. It has to matter that Deere has taken out 10% of its stock in the last four years. It does matter that Black & Decker (NYSE: BDK) (Cramer's Take) has eliminated almost 20% of its equity. Emerson's taken out 5%, same with Boeing (NYSE: BA) (Cramer's Take). There's just a huge amount of equity being shrunk.
TheStreet.com's Jim Cramer says recent downgrades are killing whole industries, and they're coming at a terrible time.
You can't lose autos and aerospace. Yet that's what's happening. The devastating aerospace downgrade by Goldman yesterday had pin action galore, wrecking everything from United Tech (NYSE: UTX) (Cramer's Take) and Parker-Hannifin (NYSE: PH) (Cramer's Take) to BE Aerospace (NASDAQ: BEAV) (Cramer's Take). It took the whole frame down with it and made everything toxic. And it happens at a terrible time. It isn't like Honeywell (NYSE: HON) (Cramer's Take), which with a few days left in the quarter can come out defending itself. Goldman rolled a perfect strike.
TheStreet.com's Jim Cramer says lots of companies now thrive with crude up here.
Oil's not a tax on everything -- it's a tax on the consumer. That's what I come down to when I see the charts this weekend and ponder what's happening in so much of industrial America.
Company after company that I examine -- the new techs, as I call them -- actually benefit from higher oil prices. Or they can pass them on with ease, because of the worldwide demand being so strong.
Take all of the companies involved with making a Boeing (NYSE: BA) (Cramer's Take): Boeing itself, Alcoa (NYSE: AA) (Cramer's Take), Honeywell (NYSE: HON) (Cramer's Take) and Precision Castparts (NYSE: PCP) (Cramer's Take) being good examples. Each of these is necessary because the new Dreamliner burns lots less fuel, and with fuel the biggest airline cost, it stands to reason that higher energy prices make the plane more desirable even at a higher price point.
MOST NOTEWORTHY: MedicNova, Transocean and Lennox were today's noteworthy initiations:
Rodman & Renshaw is positive on MedicNova's (NASDAQ:MNOV) two primary products in development: MN-221, for the treatment of severe asthma and MN-166, an oral treatment for multiple sclerosis. The firm is also positive on MNOV's valuation; shares were initiated with an Outperform rating and $9 target.
Transocean (NYSE:RIG) is UBS's Top Pick as they believe it is the primary beneficiary of rising deepwater dayrates. Shares were assumed with a Buy rating and $201 target.
Suntrust initiated Lennox (NYSE:LII) with a Neutral rating and cites near-term visibility.
OTHER INITIATIONS:
Dean Foods (NYSE:DF) was initiated with an Outperform rating and $29 target.
Goldman started Parker-Hannifin (NYSE:PH) with a Neutral rating and $92 target.
TheStreet.com's Jim Cramer says there's some reason for caution, but no reason to get out of the market here.
There all right there. Don't you feel it? Hundreds of stocks at resistance. Hundreds have formed a nice base. The Transports and the Dow are moving in synch. The earnings period surprisingly great, with so many companies not stung by the raw costs. Three straight up weeks, with all the commodity stocks showing signs of rolling over; most at crucial "must hold" levels except for gold, which has already crashed, making the inflation case much dimmer in the eyes of the traders.
Yet, you simply can't read the papers. They are too awful. The cost to the consumers for everything from food to gasoline is humongous and going higher, according to all the food execs I had on last week. We are getting nowhere near a bottom in housing. The layoffs, while not significant in the Labor Report on Friday, sure seem endless. The two major presidential candidates from the Democratic side want to tax the oil companies into oblivion, the leaders of the last year. Exxon (NYSE: XOM) (Cramer's Take) blew the quarter. So did GE (NYSE: GE) (Cramer's Take).
Too far, too fast, based on those grim items.
To me, this is the first week since the Bear Stearns (NYSE: BSC) (Cramer's Take) bottom that I think seems aimless.
But perhaps there's a "split the difference" way to approach this week: options expiration.
Parker Hannifin Corporation (NYSE: PH) manufactures fluid power systems, electromechanical controls and related components. Its Industrial unit offers hydraulic systems, filters, sealing devices, pneumatic components and electromechanical instrumentation to OEMs in various production and processing industries. The firm's Aerospace segment provides hydraulic, fuel, and pneumatic systems used in commercial and military airframe and engine programs. The Climate and Industrial Controls division makes refrigeration and air conditioning systems. The company employs more than 57,000 people in 43 countries around the world. Eaton Corporation (NYSE: ETN) and Honeywell International (NYSE: HON) are competitors.
Investors were pleased last week, when the firm reported fiscal Q3 EPS of $1.49 and revenues of $3.18 billion. Analysts had been looking for $1.34 and $3 billion. Management pointed to growth in many key markets, including aerospace. The firm also guided FY08 EPS to $5.40-$5.60, versus consensus of $5.28.
Readers of this space know that my investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, Parker-Hannifin is worth a review.
Parker-Hannifin (NYSE: PH) is one of the world's largest makers of components that control the flow of industrial fluids; control systems for machinery/equipment; motion control products; fluid purification, fluid and fuel control; process instrumentation; air conditioning / refrigeration; electromagnetic shielding; and thermal management products and systems.
In general, analysts expect PH to register 10-14% revenue growth in F2008, on solid growth in industrial and aerospace work, internationally. Moreover, the global aerospace growth cycle is expected to continue through 2008 and into 2009, netting impressive results for PH.
Further, although the majority of PH's revenues is U.S.-based, and those division will not achieve their peak performance due to the barely-growing U.S. economy, Parker's international industrial/business segment is expected to continue to benefit from emerging market / developing economies work.
Parker Hannifin (NYSE: PH), makers of motion and control technologies, was just awarded $2 billion in contracts to supply fuel and hydraulic systems for the new A350 aricraft. Parker's aerospace division will supply the entire fuel management system for the wide body aircraft. Likewise, Parker aerospace will supply hydraulic power and distribution components and measurement controls for the A350.
News of these awards comes immediately following Parker Hannifin's posting a record 2Q2008 sales revenue of $2.8 billion, an increase of almost 13%. A healthy 5% of this growth was organic, 3% resulted from four separate acquisitions the company made during the quarter. Net income increased just under 10% to $212 million, and cash flow increased more than 8% to $473 million. As a result, diluted EPS increased 13% to $1.23.
Parker Hannifin reported great results in its international segment. Revenue increased 28% to $1.2 billion, while operating income increased 44% to $175 million. These results helped make up for some softness in the domestic industrial market. While the domestic aerospace segment posted a 7% increase in sales, operating income dropped by 23%. The same is true of the climate control segment which posted a 22% drop in operating income.
On a more positive note, total orders are running 10% ahead of last year, with both industrial and aerospace segments posting 16-19% increases. CEO Don Washkewicz forecasts good order growth throughout all of 2008. As a result, he boosted earnings guidance modestly to the $5.15-$5.40 range.
Parker Hannifin forecasts a number of new product launches in 2008, with more products in the development pipeline. The company has increased its annual dividend for 51 consecutive years and shows no signs of breaking with tradition. The stock currently trades just under $62.
TheStreet.com's Jim Cramer says Parker Hannifin's punishment for good results is typical of what to expect in this market.
Parker Hannifin (NYSE: PH) (Cramer's Take) defines this market. The company delivers a perfectly good quarter, says international is smoking, boosts forecast, commits to more buybacks -- and then loses almost 10% of its value.
That's what this market is all about.
It was in the cards. You knew it if you listened to the conference call. Because on that call the company had to answer endless questions about how it would fare in a recession, even though it saw improvement domestically.
PH is one of those companies that keeps the Fed from easing: its commercial aerospace and engines businesses are really strong. But no matter what, the Street has decided that PH spent too much money buying back stock at higher prices -- the mantra of the moment -- and can't possibly do well in the now well-baked-in Fed-mandated recession.
TheStreet.com's Jim Cramer says the market showed its stuff Monday, and health care, tech and retail look like buys.
Sweet comeback as people are getting too panicked and too bearish. I noticed it first in the retailers, which all trade like subprime-mortgage originators.
It then spread to the oil and oil-service stocks (as if oil is going to plummet, not just find a level). The minerals got whacked something awful off the usual recession gambit.
Then it started hitting tech names, including ones that are doing well and just reported, like EMC (NYSE: EMC) (Cramer's Take) off the big downgrade.
To me the last straw was the collapse, for a second day, of Goldman Sachs (NYSE: GS) (Cramer's Take), something that simply makes no sense at all except from the proposition that both competitors, Merrill (NYSE: MER) (Cramer's Take) and Citigroup (NYSE: C) (Cramer's Take), will now be better run (which is a given, by the way).
The ability of this market to shrug off these losses will be the tale of today's tape. Resilience has been the hallmark of this market when it comes up against key levels, and it showed it again today.
It's probably time to do some buying of health care -- we did Monday in Action Alerts PLUS -- tech, and retail, and cover some of the financials. RELATED LINKS
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long EMC, C and Goldman Sachs.
MOST NOTEWORTHY: Centene, Brinker International, Harmonic, Idex and Royal Dutch Shell were today's noteworthy upgrades:
Jefferies upgraded shares of Centene Corporation (NYSE: CNC) to Buy from Hold as they expect the company is benefiting from above 20% revenue growth next year and SG&A leverage opportunity over the next 12–18 months.
Bear Stearns upgraded shares of Brinker International (NYSE: EAT) to Outperform from Peer Perform as they believe Brinker's turnaround efforts can enhance shareholder value.
Friedman Billings raised shares of Harmonic (NASDAQ: HLIT) to Outperform from Market Perform based on the favorable outlook for cable and satellite spending on HD video and other projects.
The firm also upgraded Idex Corporation (NYSE: IEX) to Outperform from Market Perform, citing the company's positive 2008 outlook and solid end markets.
CIBC upgraded J. Crew Group (NYSE: JCG) to Sector Outperformer from Sector Performer and Parker Hannifin (NYSE: PH) to Sector Performer from Sector Underperformer.
MOST NOTEWORTHY: Cadbury Schweppes (CSG), Parker Hannifin (PH), Christopher & Banks (CBK), Benihana (BNHNA) and Sears Holdings (SHLD) were today's noteworthy downgrades:
Cadbury Schweppes PLC (NYSE: CSG) was downgraded to Equal-Weight from Overweight at Lehman Brothers to reflect lower-than-expected value from Cadbury's American Beverages sale or demerger.
Christopher & Banks Corporation (NYSE: CBK) was downgraded to Sector Performer from Outperformer at CIBC World Markets following the unexpected departure of CEO Matthew Dillon. Suntrust downgraded shares of the stock to Neutral from Buy citing pressure in the retail sector.
KeyBanc lowered shares of Benihana Inc (NASDAQ: BNHNA) to Buy from Aggressive Buy following the company's Q2 results.
Sears Holdings Corporation (NASDAQ: SHLD) was downgraded to Peer Perform from Outperform at Bear Stearns citing a continued deterioration in fundamentals and challenging outlook...
Goldman Sachs downgraded Renovis Inc (NASDAQ: RNVS) to Sell from Neutral.
Raymond James downgraded shares of Amedisys Inc (NASDAQ: AMED) to Outperform from Strong Buy and shares of Restoration Hardware Inc (NASDAQ: RSTO) to Underperform from Market Perform.
CNBC's Jim Cramer noted after the latest Fed meeting minutes were released yesterday that Bernanke & Co must be basing their economic outlook solely on our export economy. The overall economic situation in the US is not as rosy as the Fed is saying, according to Cramer. However, he thinks it is true that companies with a lot of international trade are, in fact, a sound subset of the economy. Cramer names Caterpillar (NYSE: CAT) as one such company that is thriving and should continue to thrive thanks to support from fast-growing trading partners. Others are Freeport-McMoRan (NYSE: FCX), Parker-Hannifin (NYSE: PH), and Boeing (NYSE: BA). If you are inclined to agree, then it could be a good time to get into a bullish hedged trade on CAT.
After hitting a one year high of $87.00 in July, the stock has slid below $75 in recent weeks. This morning, CAT opened at $74.23. So far today the stock has hit a low of $73.35 and a high of $74.87. As of 11:05, CAT is trading at $74.60, up $0.43 (0.6%). The chart for CAT looks bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
If you agree with Cramer, then for a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $60 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.5% return in just three months as long as CAT is above $60 at November expiration. Caterpillar would have to fall by more than 19% before we would start to lose money.
CAT hasn't been below $60 since January and has shown support around $73 recently. This trade could be risky if the economy continues to worsen, but even if that happens, this position could find some support from the stock's 200-day moving average, which is at $70 and rising.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: At publication time, Brent neither owns nor controls positions in CAT.
MOST NOTEWORTHY: The machinery industry, Sohu.com (SOHU), Intuit (INTU), Priceline.com (PCLN) and Expedia (EXPE) were today's noteworthy initiations:
JP Morgan assumed coverage of 5 machinery stocks: The firm assumed Eaton (NYSE: ETN) and Illinois Tool Works (NYSE: ITW) with Overweight ratings and Ingersoll-Rand (NYSE: IR), Parker Hannifin (NYSE: PH) and Kennametal (NYSE: KMT) with Neutral ratings. JP Morgan's top picks in the group are Illinois Tool Works and Eaton.
Pali initiated Sohu.com (NASDAQ: SOHU) with a Buy rating and $41 target and believes the Olympic Games represent the biggest growth catalyst for the company.
Jefferies started shares of Intuit (NASDAQ: INTU) with a Buy rating and $34 target, likes the momentum in TurboTax and QuickBooks and sees potential upside fo FY08 expectations.
Banc of America initiated Priceline.com (NASDAQ: PCLN) with a Buy rating and $96 target and is positive on the company's European positioning given expectations for top line growth and margin expansion. The firm also started shares of Expedia (NASDAQ: EXPE) with a Buy rating and $35 target, positive on the company's strong management, solid competitive positioning and improving fundamentals.
OTHER INITIATIONS:
First Albany assumed coverage of Cougar Biotechnology (OTC: CGRB) with a Buy rating and $29 target.
TheStreet.com's Jim Cramer says when the dust settles, we'll notice the reduced equity here, and stocks will rise to reflect it. 
.gif){kind=logo}
Here are some highlights from this past week's 
.gif){kind=logo}
.gif){kind=logo}
Stock picks and pans for troubled times: AAPL, COST, EWBC, IBM, YUM, PG ...
NYU's Roubini: 'All fronts' approach necessary to end global financial crisis 
Global Q&A: A rainy day in London
