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Dutch Bros CEO lays out the coffee chain's cross-country expansion plans

Aseem — Fri, 08 Nov 2024 23:51:24 +0000

Dutch Bros. CEO Christine Barone described the coffee chain’s cross-country expansion plans in a Friday interview with CNBC’s Jim Cramer, saying it may be some time before the Oregon-based company opens stores in the Northeast region.

“We’re really growing in a contiguous way, so that we’re growing across states that are next to each other,” Barone said. “We just had the ability to enter Florida this year. So, we still have a lot of growth ahead of us. We will be there, but it’ll be a little while.”

Dutch Bros. operates in 18 states on the West Coast and in the South, including in California, Arizona and Texas. The company made its market debut in 2021, and the stock is currently up 48.97% year-to-date. It reported a solid quarter Wednesday night that sent shares surging more than 28% Thursday, and they continued to climb during Friday’s session, closing up more than 5%.

Dutch Bros stock year to date

According to Barone, the company’s growth is “predicated on people” and added that the chain received 400,000 applications for 11,000 available positions this year. During Dutch Bros.’ recent earnings calls, Barone said management plans to open at least 160 new shops in 2025. She also discussed the company’s product strategy, saying Dutch Bros. puts an emphasis on iced beverages and personalized drinks.

“Personalization has been a big part of us since the very beginning,” she said. “So, I think we’ve really built our operations, and we’ve built our brand around the ability to personalize really well.”

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Jim Cramer: Abbott stock is 'dirt cheap' after a surprising legal win validates our conviction

Harsh — Fri, 01 Nov 2024 14:08:22 +0000

Abbott Laboratories shares jumped Friday after the Club holding picked up a surprise victory in a trial over the safety of its formula for premature babies. The news Abbott Labs’ specialized formula is not responsible for a young baby boy developing a severe intestinal illness known as necrotizing enterocolitis, or NEC, a jury in Missouri state court found Thursday night —wrapping up a roughly five-week trial closely watched by investors. The jury also cleared Mead Johnson, a subsidiary of Reckitt Benckiser , and St. Louis Children’s Hospital from liability in the case. Plaintiffs had argued that Abbott and Mead Johnson’s formulas — used to treat premature babies in neonatal intensive care units — raised the risk of developing NEC, and that the companies did not properly disclose that risk. For their part, Abbott and Mead Johnson strongly deny the allegations and defend the products as medically necessary treatments for babies in certain instances when breast milk cannot be used. “We are pleased with the jury’s decision,” Abbott spokesperson Scott Stoffel said in a statement to CNBC on Friday morning. “The decision reinforces what we, the medical community and regulatory bodies have said: that preterm infant nutrition products are safe, and there is no reliable scientific evidence that they cause or contribute to cause NEC. Abbott stands by the vital role its preterm infant formula and human milk fortifiers serve in the hospital in nourishing premature babies.” ABT YTD mountain Abbott Laboratories’ year-to-date stock performance. Big picture Investors were on edge ahead of Thursday night’s verdict because both companies had lost similar cases this year — Mead Johnson in March, followed by Abbott Labs in late July. The March defeat suffered by Mead, in particular, put the NEC issue firmly in the spotlight, causing a steep and prolonged sell-off in the shares of both companies. We bought additional shares of Abbott Labs on the way down on multiple occasions, believing the magnitude of the market value decline did not adequately reflect the potential damages the company would have to pay if its legal fight went poorly despite the medical community on its side. That includes a trio of major U.S. health agencies, which last month put out a statement in support of the specialized infant formulas like Abbott’s. The legal overhang on Abbott Labs has been real, even if shares have found some traction in recent months. Through Thursday’s close, the stock was up around 13% from its 2024 lows set on July 18. Abbott’s highest close of the year, at $120.96 a share, came on March 8 — before NEC concerns became prevalent. Based on Friday’s premarket gains, the stock was on track to approach those levels. Bottom line Abbott Labs still faces other cases over its specialized formulas across the country, but Thursday night’s win is significant. The stock reaction makes that clear, gaining more than 4.5%. “They won a case they were supposed to lose. … The day of the plaintiffs taking it to Abbott is over,” Jim Cramer said Friday on CNBC. “That stock is dirt cheap,” he added. Abbott shares traded around 22 times forward earnings estimates Friday, below their five-year average of 24, according to FactSet. One reason this win is such a big deal: The venue for this case was generally considered friendly to plaintiffs, Cramer has repeatedly pointed out that the case Abbott Labs lost in July was also in Missouri state court. Those worries were compounded during the October trial when the judge did not allow a recent statement from U.S. health agencies to be shown to the jury. “There is no conclusive evidence that preterm infant formula causes NEC,” the Food and Drug Administration, Centers for Disease Control and Prevention and National Institutes of Health wrote in an October statement . At the time, we heralded that statement as a win for Abbott, only to need to temper our expectations after the judge made his decision. Still, we figured Abbott Labs may lose this case, but at least as trials began in other states, the company would most likely be able to use the supportive statement from the FDA, CDC and NIH to buttress its defense. With victory in hand, Abbott Labs will now begin the next phase of its legal fight on much stronger ground. The hope is that, eventually, the conversation about Abbott Labs becomes squarely focused on its attractive fundamentals, which were on display last month in its third-quarter earnings report . When that happens, health-care investors should like what they hear. (Jim Cramer’s Charitable Trust is long ABT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Stacey Wescott | Chicago Tribune | Tribune News Service | Getty Images

Abbott Laboratories shares jumped Friday after the Club holding picked up a surprise victory in a trial over the safety of its formula for premature babies.

Palo Alto shares helped by contract news, Abbott Labs braces for lawsuit ruling

Harsh — Thu, 31 Oct 2024 18:50:48 +0000

Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Markets: Wall Street is under pressure Thursday, led to the downside by the tech-heavy Nasdaq Composite , which dropped more than 2%. The S & P 500 is down more than 1%, while the Dow Jones Industrial Average lost about 260 points, or 0.6%. Selling in Microsoft and Meta Platforms following their Wednesday evening earnings results weighed on the Nasdaq and S & P 500. Also adding to the weakness: The yield on the closely watched 10-year Treasury note continued its climb higher, topping 4.3% at one point in the session. Investors are gearing up for Friday morning’s nonfarm payrolls report, which is expected to show the U.S. economy added 100,000 jobs in October while the unemployment rate remain unchanged at 4.1%. But many expect noise in the numbers due to the impact of the recent hurricanes and Boeing strike. The data will help shape Wall Street’s expectations around the path of Federal Reserve policy. Currently, traders are pricing in a roughly 95% chance of a quarter-point interest rate cut at the central bank’s meeting next week. Earlier Thursday, the Fed’s favorite inflation gauge, the PCE price index, matched expectations, rising 2.1% in September . Cyber deal: Morgan Stanley put out a note Thursday morning on Club holding Palo Alto Networks that caught our eye, discussing reports of the cybersecurity leader landing a five-year, roughly $1 billion software licensing agreement with the Department of Defense. An executive at Palo Alto Networks also posted about it on LinkedIn , without mentioning the dollar amount and duration. “While timing of bookings or revenue recognition isn’t clear yet, we think this could provide multi-year tailwinds,” Morgan Stanley analysts wrote to clients. These headlines could be helping support shares of Palo Alto in Thursday’s down market. The stock rotated between slight gains and losses, holding up much better than an exchange-traded fund that tracks the cybersecurity industry , which dropped more than 1% in the session. Shares of our other cyber holding, CrowdStrike , were down nearly 4% Thursday. To be sure, Morgan Stanley sought to temper expectations on the reported Palo Alto deal. The firm noted, for example, that the contract was awarded through software reseller Carahsoft, which means it “likely includes ~15% reseller margin for Carahsoft.” Nevertheless, analysts said they “think this contract award … suggests the large but elusive DoD opportunity could finally be coming into fruition.” Palo Alto did not respond to CNBC’s request for comment on the licensing agreement. The company experienced some softness in its federal government business earlier this year and also tamped down expectations about the next few quarters, which added to the messiness in its February earnings report. More recently, on an August earnings call, Palo Alto CEO Nikesh Arora said the company continued to have “a muted set of expectations” around its federal government business due to the election. Trial decision looms: We’re bracing ourselves for a verdict soon in Abbott Labs ‘ latest trial over allegations that its specialized premature infant formula causes an intestinal illness commonly abbreviated as NEC. The company has strongly denied the claims, and recently received the backing of major U.S. health agencies, which in a statement earlier this month came out in support of using the formulas like Abbott’s to treat premature infants. “There is no conclusive evidence that preterm infant formula causes NEC,” the agencies wrote. However, the judge in Abbott’s trial — held in the 22nd Judicial Circuit of Missouri — did not allow that statement to be shown to jurors in the case . For that reason, we’re not expecting the Club holding to receive a favorable verdict. A loss in the case could ding the stock, but that could represent a buying opportunity, according to Director of Portfolio Analysis Jeff Marks. The reason is that while Abbott faces additional lawsuits over its formula, we expect the statement from U.S. health agencies will be allowed as evidence in future cases. Up next: Apple , Amazon and Coterra Energy are set to report quarterly results after the closing bell Thursday. Outside the portfolio, we’ll also hear from Intel , U.S. Steel and Juniper Networks . As mentioned, the big event Friday is the October nonfarm payrolls report. Chevron , Exxon Mobil and chemical maker LyondellBasell Industries are among the notable earnings reports Friday. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street.

We're hiking our GEHC price target, looking beyond a mixed quarter to next year's catalysts

Harsh — Wed, 30 Oct 2024 17:55:36 +0000

GE Healthcare reported a mixed quarter before Wednesday’s opening bell. While revenue slightly missed, an earnings beat along with a number of other positives pushed the stock higher. Revenue rose just under 1% year over year to $4.86 billion in the third quarter, just short the $4.87 billion expected, according to analyst estimates compiled by LSEG. Organic revenue growth of 1% matched expectations. Adjusted earnings per share in Q3 jumped 15% to $1.14, outpacing the LSEG consensus estimate of $1.05, thanks to ongoing cost optimizations, particularly at the gross margin level. Management raised the midpoint of full-year earnings guidance despite the continued in weakness in China that has been hampering top-line organic growth. GEHC YTD mountain GE Healthcare YTD We also like how 2025 is setting up for GEHC, with stimulus in China still working its way into the market, a newly approved drug used in radiology, Flyrcado, becoming commercially available, and indications of market share gains based on a readthrough from a competitor. We’re bumping up our price target to $95 per share from $92 but keeping our 2 rating on the stock. Bottom Line Results were mixed, but it comes as no surprise that the quarter was negatively impacted by weakness in China. Excluding business in the world’s second-largest economy, reported ex-China sales were up about 5%, with ex-China organic order growth up 4% versus the prior year. In the U.S., CEO Peter Arduini commented on the call that “strong orders and sales were driven by multiyear enterprise deals, primarily made up of imaging products, particularly PET and CT systems, which are critical to the diagnosis and treatment of chronic diseases. We are pleased with the progress that we’re making to secure long-term partnerships, which is foundational to our growth strategy. Another revenue driver in the quarter was PDx [Pharmaceutical Diagnostics segment]. The team continues to deliver for customers and we’ve seen PDx reports seven quarters of high-single-digit or double-digit organic revenue growth.” On China, Arduini added, “We continue to monitor the market, which has been slow to recover. Coordination of stimulus funding is taking longer, so customers are still delaying normal purchasing. This is impacting overall growth in the China market in the near term. Bottom line is we continue to view this as a temporary challenge and over the mid to long term, we see China as an attractive market.” Despite the China headwind, management is taking in orders faster than they can deliver on them, resulting in a 1.04x book-bill ratio in the quarter (remember, anything above a ratio of 1 is a positive sign of future growth). As a result, the team exited the quarter with a $19.6 billion backlog, representing a $1.2 billion increase versus the year-ago period and a $600 million increase on a sequential basis. GE Healthcare Why we own it : GE Healthcare is the global leader in medical imaging, diagnostics, and digital solutions in health care. Its split from General Electric in 2023 enabled the now-standalone company to invest more aggressively in R & D, leading to new product innovations, especially in artificial intelligence. The combination of new, higher-priced products along with the optimization of its business post-split creates an underappreciated margin expansion story. The rollout of new Alzheimer’s disease therapies is another longer-term tailwind. Competitors : Philips and Siemens Most recent buy : May 29, 2024 Initiated : May, 17, 2023 We’re also looking forward to hearing more from management at the company’s investor day event on Nov. 21. Among the topics in focus will be management’s comments on Flyrcado, which is an injection PET radiotracer for enhanced diagnosis of coronary artery disease that was recently approved by the U.S. Food and Drug Administration. Management called it a game changer. On the call, Arduini said, “We estimate that there are around 6 million myocardial perfusion imaging procedures per year in the U.S., of which we believe PET MPI [myocardial perfusion imaging] makes up about 5% to 10%. Revenue will ramp over time, and we’re working with health-care providers to build out the capacity required to enable greater access to PET for cardiology. We see an opportunity for revenues of greater than $500 million annually from this one proprietary molecule once the health system infrastructure is in place.” Commentary In GE Healthcare’s Imaging segment — home to products such as MRI and CT machines — quarterly revenue was down about 1% organic versus the year-ago period as ongoing weakness in China was only partially offset by growth in the U.S. That said, higher prices, efficiency gains and a favorable sales mix provided for a 200 basis point expansion in the segment’s EBIT margin. “We continue to see strong demand, particularly in the US, with opportunities in replacements, upgrades and services,” CFO James Saccaro said on the post-earnings conference call. Advanced Visualization Solutions segment — formerly Ultrasound — revenue in the third quarter was largely unchanged year-over-year as an increase in U.S. sales volume was entirely offset by weakness in China. The segment’s earnings before interest and taxes (EBIT) margin contracted 190 basis points due to an unfavorable sales mix. Patient Care Solutions (PCS) segment — covering a range of medical devices like electrocardiogram machines and consumables used to take blood pressure readings, among others — saw sales increase 2% organically as management was able to increase production capacity and factory output rates and in turn work through the segment’s backlog. Efficiency gains allowed for a 10-basis-point improvement in the segment’s EBIT margin. Saccaro said on the call, “The team has reduced past due backlog throughout the year, driven by lean principles to increase capacity. These actions will allow for greater fulfillment flexibility in future quarters.” Pharmaceutical Diagnostics (PDx) segment — used in radiology and nuclear medicine to deliver more precise diagnoses — was particularly strong, delivering segment revenue growth of 7% organically. EBIT margin for PDx improved 270 basis points driven by an increase in procedure volumes, price hikes and new product introductions. This is the unit that Flyrcado will be housed under. Guidance GEHC sees full-year organic revenue growth trending toward the lower end of the previously provided 1% to 2% range, with management citing “continued China market softness” as the main cause. The Street was looking for a 1.5% advance versus the prior year. On the other hand, the team raised the lower end of its full-year adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) target range, now targeting 15.8% to 16% versus a range of 15.7% to 16% previously, which compares to a 15.8% consensus estimate. Adjusted full-year EPS is now expected to be between $4.25 and $4.35, an increase on the low end from the prior range of $4.20 to $4.35 per share. That compares to a consensus estimate of $4.25. Free cash flow was reiterated at roughly $1.8 billion. (Jim Cramer’s Charitable Trust is long GEHC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

An examination with a CT scanner is prepared in the emergency room of the university hospital (UKJ) in Jena, Germany. The GE Healthcare scanner is called the Revolution CT.

Martin Schutt | picture alliance | Getty Images

GE Healthcare reported a mixed quarter before Wednesday’s opening bell. While revenue slightly missed, an earnings beat along with a number of other positives pushed the stock higher.

Danaher returns a key business to growth, and we're raising our stock rating back to buy

Harsh — Tue, 22 Oct 2024 19:17:30 +0000

Danaher shares declined Tuesday despite the life sciences company returning its key bioprocessing business to growth in the third quarter. Danaher’s revenue for the three months ended Sept. 27 advanced 3% year over year on a reported basis, to $5.8 billion, outpacing the LSEG consensus estimate of $5.59 billion. On an organic basis, sales were up 0.5%. Adjusted earnings per share decreased 0.6% annually to $1.71 but still topped the $1.57 per share that had been expected. DHR YTD mountain Danaher YTD The stock dropped 4% as investors questioned the sustainability and magnitude of bioprocessing improvements in 2025. Wall Street’s reaction does not reflect the strides Danaher made in that important end-market, which is contained in the company’s biotechnology segment. Some of Tuesday’s weakness could also be attributed to profit-taking since Danaher shares jumped on last week’s solid results from German life sciences peer Sartorius. Bioprocessing is the use of cell components to make a variety of products including targeted therapies. Danaher is a leader in products and services that support health- care research and development. Bottom line Danaher’s stock move lower presents a buying opportunity, and we’re upgrading it to our buy-equivalent 1 rating and increasing our price target to $305 per share from $295. With the long-running destocking headwind abating, demand from larger bioprocessing customers improved. Bioprocessing in China, however, remained suppressed. Management said a recovery there may take “more time to play out” in the near term. In addition to better-than-expected biotechnology sales, Danaher’s life sciences and diagnostics segments were also strong. Danaher Why we own it : Danaher is a best-in-class life sciences and diagnostics company, with a management team who have proven time and again their ability to find new ways to grow. We expect to see a turn in bioprocessing-related orders this year as biotech funding comes back online and larger customers wind down efforts to flush out excess Covid-era inventory. Competitors : Sartorius and Thermo Fisher Scientific Weight in portfolio : 4.6% Most recent buy : July 2, 2024 Initiated : Jan. 3, 2022 Free cash flow was better than expected at $1.23 billion, representing nearly 12% growth versus the year-ago period. The company also achieved a free cash flow to net income conversion ratio of 150%. Year to date, that ratio stands at 135%. That means its earnings are fully backed by cash, and then some, and are higher quality than profits without an equal or greater amount of cash in hand. During the third quarter, management repurchased about 2.6 million shares. Commentary Biotechnology segment sales in Q3 dipped 0.7% on a core basis to $1.65 billion but exceeded estimates. Bioprocessing realized low-single-digit growth in the quarter. Bioprocessing has been under pressure in recent quarters due to a lack of funding for smaller businesses after the collapse of Silicon Valley Bank in early 2023 and destocking from larger customers coming out of the Covid pandemic. On the post-earnings call, Danaher CEO Rainer Blair said, “We’re not seeing the same level of [large customer] improvement in underlying performance from our smaller customers. Despite a modest improvement in the [biotech] funding environment, they continue to rationalize their therapeutic programs and remain cautious with their investments.” Life sciences segment sales were better than expected but still dipped 2% on a core basis to $1.78 billion. China remained a headwind, with Blair saying on the call that “announced stimulus measures in China have not yet translated into meaningful order activity as customers are still awaiting details on the implementation of these programs.” Outside of China, demand is still somewhat muted but expected to improve. Diagnostics segment sales advanced 5% on a core basis to $2.36 billion and beat estimates. At subsidiary Cepheid, which handles molecular diagnostics, the team highlighted “broad-based strength” in both the respiratory and non-respiratory parts of the business. Respiratory revenue of $425 million more than doubled management’s expectations due to higher volumes and a favorable mix of its 4-in-1 test for Covid-19, Flu A, Flu B, and respiratory syncytial virus (RSV). Guidance For the current quarter, the fourth of fiscal 2024, Danaher expects a revenue decline in the low single digits versus last year, on a core basis. That’s a miss. Expectations were for an increase of 2.6%, according to FactSet. For the full year, management’s forecast was unchanged. The team expects total sales to decline by low single digits compared to expectations for a decline of 0.5%. (Jim Cramer’s Charitable Trust is long DHR. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

In this photo illustration, a Danaher Corporation logo seen displayed on a tablet.

Igor Golovnov | SOPA Images | Lightrocket | Getty Images

Danaher shares declined Tuesday despite the life sciences company returning its key bioprocessing business to growth in the third quarter.

Embattled Abbott Labs comes through with a strong quarter, buyback announcement

Harsh — Wed, 16 Oct 2024 16:23:28 +0000

Medical device maker Abbott Laboratories on Wednesday delivered better-than-expected quarterly results and upped its earnings guidance for the third straight quarter. Shares rose more than 1%, shaking off an initially subdued reaction. Revenue in the three months ended Sept. 30 rose 4.9% to $10.64 billion, topping estimates of $10.55 billion, according to data provider LSEG. Organic sales, which exclude Covid testing, were up 8.2% from the year-ago period. It’s unclear whether analyst estimates are comparable. Adjusted earnings per share (EPS) of $1.21 beat LSEG expectations by a penny and increased 6.14% on an annual basis. ABT YTD mountain Abbott Labs’ year-to-date stock performance. Abbott shares are extending their period of outperformance versus the market and health-care peers. The stock entered Wednesday’s session up a little more than 10% since the July 26 close — after the closing bell that day, the company was ordered to pay $495 million in damages in a court case over its premature infant formula, which has been a major overhang on the stock since mid-March. That advance is ahead of the S & P 500 , a closely followed health-care exchange-traded fund , which gained 6.5% and 1.9%, respectively, over the same stretch. Bottom line In its third quarter, Abbott Labs demonstrated why we wanted to stick with the stock in the face of legal battles that emerged earlier this year and spooked investors. We’re reiterating our price target of $130 and 2 rating, meaning we’d wait for a pullback before adding to our position. At its lows of 2024 in July, Abbott’s market cap stood at $174.1 billion, roughly $32 billion below where it was in March before its competitor in the premature infant formula market lost a court case and put Abbott’s own case load in the spotlight. We battled the stock in the months that followed, arguing the selling was overblown, especially considering the scientific community backed Abbott’s view that the formulas were medically necessary for premature infants and did not cause an intestinal illness commonly abbreviated as NEC. A trio of U.S. agencies earlier this month threw more support behind use of the formulas . At its highs of Wednesday’s session, Abbott had clawed back all of its market cap losses since March 14. “Abbott really came through,” Jim Cramer said Wednesday. “There’s just a lot to like with the Abbott quarter.” Commentary The place to start is Abbott’s medical devices segment, which saw a roughly 12% increase in revenues to a better-than-expected $4.75 billion, as seen in the chart below. On an organic basis, which strips out the impact of foreign exchange fluctuations and divestitures, medical device sales rose 13.3%. It’s nice when a company’s largest segment by sales is the one with the fastest growth rate — and that’s the case with Abbott. FreeStyle Libre, a continuous glucose monitor (CGM) for people with diabetes, continued its impressive growth in the quarter, with organic sales up 21%, a slight acceleration from the prior three-month period. While Abbott has benefited from the struggles of CGM competitor Dexcom , CEO Robert Ford maintained an upbeat view on the market in the near and long terms. “This is a mass market opportunity that we have,” he said, noting there’s about 10 million CGM users worldwide right now but over 100 million diabetics in developed countries. Abbott and its peers are increasingly targeting CGMs to non-diabetics, hoping that health-conscious people would want to use biosensors to learn about their body’s response to factors like food, stress and exercise. Abbott launched its over-the-counter CGM called Lingo in the U.S. in early September , and Ford said the product is “off to a very good start.” People can purchase a one-sensor pack for $49, two for $89 or six for $249. The two-sensor pack is the most popular version, he said. The sensors last about two weeks, and Ford said he was positively surprised by the reorder rates so far. Abbott has targeted $10 billion in sales of CGMs by 2028, and Lingo represents a “great opportunity” to add to that goal over time, Ford said. Another highlight: Abbott Labs announced its board authorized a new $7 billion share purchase program. Its prior authorization from 2021 was getting low, Ford said. In the third quarter, Abbott bought back $750 million worth of stock, with Ford saying executives believed there was a disconnect between the stock’s valuation and the company’s business fundamentals. Indeed, Abbott usually prioritizes investing in its product pipeline over share repurchases, so the fact that management stepped up its buyback program really shows how they feel about the current stock price. Abbott’s nutrition business — home to brands such as Ensure protein powder and PediaSure drinks for kids — was a weak spot, just as it was in the second quarter. Sales were down about 0.3% year over year to $2.07 billion, short of the $2.17 billion expected by analysts, according to FactSet. On an organic basis, revenue was up 3.4% in the segment. Ford said the international pediatric business was the biggest drag on nutrition in the quarter, blaming that on Abbott’s own “commercial execution” early in the quarter. The company quickly recognized the softness and took steps to fix it, Ford said, including personnel changes followed by inventory adjustments to distributors. Ford said early indications show that Abbott took the right corrective actions and that growth in that division and the segment overall should improve in the current quarter. On the lawsuits, specifically, Ford once again issued a strong defense of the premature infant formula. He said the statement from the three U.S. health agencies — the Food and Drug Administration, Centers for Disease Control and Prevention, and National Institutes of Health — “says a lot.” “It was a very strong statement,” Ford said, though he noted that the judge in an ongoing trial in Missouri has yet to allow it to be submitted as evidence in the case. He said he expects that in future cases, the statement and an accompanying report on NEC and formulas will be included as evidence for juries to consider. Abbott’s recent stock performance suggests investors are getting more comfortable with the litigation risk, but it’s still too early to declare complete victory. That’s why we’re generally holding off on adding to our position. Nevertheless, there’s little doubt about the strength of Abbott’s underlying fundamentals. In due time that should occupy more and more of the spotlight. Abbott Laboratories Why we own it : Abbott is a high-quality medtech company growing at a fast clip. The stock has been dealing with two overhangs: falling Covid testing sales and concerns that GLP-1 adoption will disrupt its leading continuous glucose monitor. As Abbott’s organic sales growth continues to shine, the market will realize both concerns are overblown. Competitors : Dexcom and Edwards Lifesciences Weight in Club portfolio : 2.89% Most recent buy : 5/29/2024 Initiated : Jan. 29, 2024 Guidance Abbott Labs now projects adjusted EPS in the range of $4.64 to $4.70, which at the midpoint is up a penny versus its prior guidance of $4.61 to $4.71. It’s the third consecutive quarter that Abbott has upped the middle of its EPS forecast. The company reiterated its full-year organic sales growth outlook of 9.5% to 10%. (Jim Cramer’s Charitable Trust is long ABT. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Attendees walk by the Abbott booth during CES 2024 at the Las Vegas Convention Center on January 10, 2024 in Las Vegas, Nevada.

Ethan Miller | Getty Images

GE Healthcare has been an under-the-radar winner — and a new catalyst just arrived

Harsh — Mon, 30 Sep 2024 19:30:34 +0000

GE Healthcare ‘s quiet outperformance is becoming harder to tune out — and its new drug used in radiology to improve the diagnosis of heart disease can help the Club stock make some more noise. In a note to clients Sunday, Wells Fargo analysts said that GE Healthcare’s diagnostic agent Flyrcado is “possibly the most underappreciated asset” owned by large medical technology companies. Flyrcado — approved by the Food and Drug Administration late Friday for the detection of coronary artery disease — is set to launch in some U.S. markets in early 2025, before availability expands. Wells Fargo said Flyrcado has peak annual sales potential of at least $1 billion and could boost earnings per share by roughly 80 cents by 2028. Wall Street currently sees GE Healthcare earning $6.72 per share in 2028, according to FactSet, up from $4.25 projected this year. “That’s incredible,” Jim Cramer said Monday about Wells Fargo’s optimism on Flyrcado. GE Healthcare has been a stock we’ve been battling since its steep slide during the second quarter. The FDA approval and impending launch of Flyrcado brightens the outlook for GE Healthcare’s diagnostic business, a part of our investment thesis that lately has not been top of mind for investors. Instead, the market has seemingly been focused on GE Healthcare’s ability to benefit from Federal Reserve interest rate cuts, which lower borrowing costs and make it easier for hospitals and other medical facilities to finance purchases of its expensive MRI and CT machines. That dynamic — coupled with the positive China stimulus announcements in recent days — turned GE Healthcare into one of our top-performing stocks in the third quarter . Shares were up another 1%-plus on Monday, pushing gains in the July-to-September period to more than 19%, compared with roughly 5% advances for both the S & P 500 health-care sector and the broad market index overall . After touching a new all-time high Friday, we trimmed our position in GE Healthcare , locking in hard-fought profits on a stock prone to periods of underperformance. Still, the fundamentals of the business look increasingly attractive, and Friday’s small sale in a run of overbought market days, according to the S & P Short Range Oscillator , was not a statement about our conviction. “I had not thought — and I should have — that the equipment here is so expensive that you need to finance it. So, once rates went down then you could get a payback,” Jim acknowledged Monday. “On top of that, now we’re getting the reasons that I felt it was important: the diagnostics.” At the time of our initiation in May 2023 , the most exciting diagnostic appeared to be Vizamyl, which is used in the detection of Alzheimer’s disease. Vizamyl’s momentum in recent quarters should continue as the nascent class of Alzheimer’s treatments — Biogen and Eisai’s Leqembi and Club holding Eli Lilly ‘s Kisunla — see more uptake. It’s clear Flyrcado also deserves attention. Flyrcado is what’s known as a radiotracer. It is given to patients via intravenous injection before they undergo a positron emission tomography, known simply as a PET scan. Flyrcado shows how blood flows through the heart muscle for patients with known or suspected coronary artery disease, the most common type of heart disease in the U.S., according to the CDC . The primary imaging technique currently used to diagnosis coronary artery disease is single-photon emission computed tomography, commonly abbreviated as SPECT. Both SPECT and PET scans are part of the nuclear medicine field, but they use different kinds of radiotracers to aid in the diagnosis process. A PET scan using Flyrcado has better diagnostic efficacy than SPECT scans, according to GE Healthcare. That makes Flyrcado a better option for “difficult-to-image patients such as those with a high body mass index (BMI) and women,” Wells Fargo analysts wrote. Due to its half-life of 109 minutes, Flyrcado also can be produced at an offsite pharmacy then delivered to hospitals and imaging centers. That is among its advantages over the existing radiotracers used in scans to detect heart disease, according to the company. “Because of these advantages, we expect Flyrcado to cannibalize current PET tracers over time,” Wells Fargo said. Analysts at Stifel are upbeat on Flyrcado’s potential, too. The radiotracer’s approval is a “clear incremental positive catalyst for GEHC, and with no [Flyrcado] contribution in consensus numbers today, it seems likely to be a growth-enhancing incremental positive for the GEHC 2025 outlook,” analysts wrote to clients Sunday. Stifel raised its price target GEHC to $102 per share from $100. Looking ahead to next year, a proposed change to the way Medicare pays for diagnostic agents such as Flyrcado could take effect, boosting its diagnostics business overall. GE Healthcare may also see a recovery in its China business due to the roll out of medical-focused stimulus spending . Management is expected to talk more about both these additional drivers at its investor day set for Nov. 21. Having just trimmed our GEHC position, we have a 2 rating on the stock, which means we’re waiting for a pullback before considering buying more. We’re reviewing our $92 price target since shares are now trading above that level. (Jim Cramer’s Charitable Trust is long GEHC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

GE Healthcare booth is seen ahead of the 2022 China International Fair for Trade in Services (CIFTIS) at China National Convention Center on August 28, 2022 in Beijing, China.

Yi Haifei | China News Service | Getty Images

GE Healthcare‘s quiet outperformance is becoming harder to tune out — and its new drug used in radiology to improve the diagnosis of heart disease can help the Club stock make some more noise.

10 things to watch in the stock market Friday including a bullish call on Best Buy

Harsh — Fri, 27 Sep 2024 13:46:00 +0000

10 things to watch Friday, Sept. 27 1. The S & P 500 was looking at a slightly higher open Friday after another record high close. The 10-year Treasury yield was finally lower following a tame August reading on the Fed’s favorite inflation gauge, the PCE price index. With just a couple trading days left in what’s historically the worst month of year, the S & P 500 was heading for its first September gain in five years. 2. Club holding Costco shares were a tad lower after a solid fiscal 2024 fourth-quarter earnings report Thursday night . The wholesale retailer’s long-awaited membership fee increase, which took effect Sept. 1, will have a limited impact until the back of its fiscal 2025 and into fiscal 2026, executives said. We raised our price target on the stock. 3. Best Buy was added to JPMorgan’s analyst focus list after a meeting with the electronics and appliance retailer’s management team. The analysts, who reiterated their $111 price target, called Best Buy a “value idea” to take advantage of the computing replacement cycle along with TV and appliance sales growth as existing home sales improve. That closely mirrors the Club’s investment thesis. 4. The Food and Drug Administration approved Bristol Myers Squibb ‘s schizophrenia drug Cobenfy, the first new treatment for the disorder approved in seven decades. Shares of the New Jersey-based drugmaker were up more than 3% on the news. 5. Wynn Resorts was upgraded to a buy-equivalent rating at Morgan Stanley. Analysts say the casino operator’s stock can start to command a higher valuation thanks to stability in Las Vegas, more details around its project in the United Arab Emirates, and increased capital returns. Wynn shares had struggled mightily since the spring but caught a bid in recent days on China stimulus news. The Chinese gaming hub of Macau has been a thorn in Wynn’s side. 6. Citigroup downgraded Dollar General to sell from neutral and slashed its price target on the stock to $73 a share, which is about $14 below its Thursday close. Analysts argued that Walmart is taking market share, making a recovery for the dollar store retailer more difficult. Jim Cramer blamed Walmart for Dollar General’s ugly earnings report last month. 7. Deutsche Bank restarted coverage of Dell Technologies with a buy rating and price target of $144 a share. The analysts expect Dell’s revenue growth to accelerate into the double digits due, in part, to the growth of its AI server business; project its bottom line growth rate to also reach double digits; and tout its “clean and simple” capital return framework. 8. Be careful ahead of PepsiCo ‘s earnings report Oct. 8, according to Citigroup. Analysts put the stock on its 30-day negative catalyst watch, saying they expect an operational sales growth miss driven by softness in the soda and snack maker’s North American business. 9. HP Inc. was downgraded to a hold-equivalent neutral from buy at Bank of America as analysts expect upside from its personal computer business to be offset by lower margins in its printer unit. HP shares moved lower Friday. 10. Wedbush Securities’ Dan Ives upped his price target on Salesforce to $325 a share from $315 after positive customer feedback at the software maker’s Dreamforce conference. As we wrote earlier this week for Club members , Salesforce’s new AI offering has jump-started the stock. Sign up for Jim’s Top 10 Morning Thoughts on the Market email newsletter for free (See here for a full list of the stocks at Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

S&P 500 was looking at a slightly higher open Friday after another record high close. The 10-year Treasury yield was finally lower following a tame August reading on the Fed’s favorite inflation gauge, the PCE price index. With just a couple trading days left in what’s historically the worst month of year, the S&P 500 was heading for its first September gain in five years.

2. Club holding Costco shares were a tad lower after a solid fiscal 2024 fourth-quarter earnings report Thursday night. The wholesale retailer’s long-awaited membership fee increase, which took effect Sept. 1, will have a limited impact until the back of its fiscal 2025 and into fiscal 2026, executives said. We raised our price target on the stock.

3. Best Buy was added to JPMorgan’s analyst focus list after a meeting with the electronics and appliance retailer’s management team. The analysts, who reiterated their $111 price target, called Best Buy a “value idea” to take advantage of the computing replacement cycle along with TV and appliance sales growth as existing home sales improve. That closely mirrors the Club’s investment thesis.

Why Eli Lilly and Palo Alto Networks are both up on news from their competitors

Harsh — Fri, 20 Sep 2024 18:14:26 +0000

Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Markets: The Dow and S & P 500 were lower Friday after surging to record highs Thursday in response to the Fed cutting interest rates by 50 basis points. It’s been a strong week for stocks with the S & P 500 gaining roughly 1.5%. The top performing sectors week to date were energy, communication services, financials and industrials. Only three sectors were on pace for a down week: real estate, consumer staples, and health care. Obesity drugs: New information often sends one company’s stock higher and causes its biggest competitor to fall. Take a look at shares of Club name Eli Lilly . They were trading higher in a soft market after a key competitor in the obesity space reported disappointing Phase 2 trial results. That competitor, Novo Nordisk , said Friday its medicine monlunabant, which is a small molecule oral cannabinoid receptor (CB1) inverse agonist, showed weight loss of about 6% at 16 weeks. This was a big disappointment. The results fell short of Lilly’s lead daily oral GLP-1 orforglipron, which has showed about 8% weight loss in 16 weeks and was well below what Novo previously suggested. Analysts at Deutsche Bank called the trial results underwhelming, adding it “removes the threat of a large well-capitalized, small-molecule competitor to LLY’s orforglipron.” Competition in the obesity space is going to heat up over the next few years, but this disappointment from Novo Nordisk shows how hard it is to make a safe and effective drug. That’s why we’ve long disagreed with the selling of Eli Lilly when a competitor puts out a press release of an early-stage trial. Some medicines will work, some won’t. Some will be highly effective, others won’t move the needle. Some will have safety and tolerability issues. This is the nature of the business. But what we know now is that Eli Lilly’s leadership isn’t going away any time soon thanks to its current lineup of obesity medications, robust pipeline, and massive manufacturing scale. Cybersecurity stocks: In other scenarios, both a company and its competitor can trade up on new news. CrowdStrike shares were on the move higher after the cybersecurity company hosted its annual conference. One of the key revelations from the event was the very little customer churn in the aftermath of the global IT outage it caused in July. Recall, that we initially had a view that competitors like Club name Palo Alto Networks would take advantage of this event to pitch their products. However, we can’t say we are completely surprised to see very few customers leave CrowdStrike. When we looked at Palo Alto’s quarter in August, the results didn’t show a huge swing in market share resulting from the outage. Sure the quarter was good because Palo Alto has a great product and value proposition, but it didn’t suggest a massive departure from CrowdStrike. Both companies are great. So why aren’t Palo Alto shares lower? CrowdStrike’s commentary likely indicated that spending on cybersecurity is still healthy, which benefits both companies. Up next: We’ll see a pickup in earnings next week. Some of the notable reports are from KB Home , which will provide insight into housing, and Micron , which will give us a good look of demand and inventory levels for high bandwidth memory (which feeds into AI chips) as well as cellphones and personal computers. Jefferies , which is always a good preview into the banks, and Club name Costco , which is a good read on consumer spending, are also out next week. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street.