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Hey, I'm Cramer. Welcome to Mad Money. Welcome to Cramerica, my friends. I'm just trying to make a little bit of money here. My job is not just to teach, but also to do some entertainment. So call me at 1-800-743-CBC. Tweet me at Jim Cramer.
So, I get this. I'm walking up to Pine Street, about a block from here. Beautiful day. And who stops me? Morris. All right. He saw me with my new haircut. We share a barber. And he says he's seen me walk around this area before. "Why don't you ask me something?" I said, "Fire away. I always stop when someone wants to talk about the show. You should know that if you're ever downtown New York."
Morris looks me in the eye and he says, "Jim, do you remember Irwin from Brooklyn?" I said, "Of course I do. He was a winner." So he tells me, he said, "That was my dad. He loved the show." We talk about Irwin, 82, taken too soon. And then he says, "Can I ask you about a stock?" I say, "Of course." And he asks, "What do I think about the stock of McDonald's for his boy here?"
Now I'm thinking the market's just looking okay, not great. Nothing to write home about. This is before we got the tech beatdown and the big move up in a lot of these soft goods companies. Dow only finished up 52 points. S&P declined 0.47%, and most importantly, the NASDAQ tumbled 1.25%.
The house of pain. So I tell them, look, I like the stock of McDonald's. We just did a piece on it, but I also worry about the execution of the new turnaround plan they just unveiled. Morris knew we'd been talking about whether the franchises would buy in. McDonald's is virtually all franchises, so you need them to onboard on any attempt to change the store design or the direction of the company.
I happened to have looked at McDonald's when I came to work this morning, and I noticed it was still at around $131, basically where it was when trading when we ran that segment last week. But I knew that with PepsiCo, I thought to be up big. More on that later. This could be a good day for the stock of Mickey D's.
I tell Morris that the best thing about McDonald's for a young kid is valuation. Right now it's trading at 17.2 times next year's earnings estimates, a huge discount from its historical valuation, which tends to be more like the mid-20s. Like I pointed out last week, the stock hasn't been this cheap since 2014 when the business was falling apart.
So I said, and this was before, remember this was midday and not when McDonald's stock was ultimately up $6, but I said to Morris, you want to buy something, let's say you want to buy 300 shares. You buy 100 shares right here, low 230s. Maybe 100 below 230, and then you wait, maybe it gives up the ghost, you get maybe 100 at $200. If not, just go in and buy the last 100. You'll have a good average. I told him that Irwin from Brooklyn would have liked that analysis if he called in about his grandson.
When I thought Morris bought it, but then he said, "Wait a second, Jim. I got something else. I got too much tech. I think I have way too much data center." And I told him that I've got a lot too, but I'm diversified with the Cramer Trust. It is killing me to be diversified here. I said, but I can't afford to change my stripes. Diversification is the only free lunch in the business. So I'm just going to, I'm not going to get trapped in all tech. My message to Morris, like we teach in the CNBC Investing Club, you got to diversify to stay in this game.
Then we shake hands and go back to work, and I discover that all hell is broken loose. Why? Because of a story that was in the Financial Times about OpenAI, one of the two private big dogs in the AI game, that OpenAI was coming up short on revenues, maybe $20 billion lower than people were looking for.
And everything in the AI data complex just is getting crushed. Nvidia, Broadcom, Google, like it was a charnel house. But it was also a perfect reminder that diversification can be a thing of beauty, one that bubbles up as fast as it takes to get a haircut. Well, I mean, as fast as it takes Eddie to do my hair. That's probably faster than yours.
Now, I want to be clear about something. I did not get any confirmation from OpenAI that its revenues are well below what was asked, what was written about just a few weeks ago. I did not get anything other than that the FT story was known and there was nothing new. I cannot challenge the FT without a direct quote saying the story is wrong coming from the company. I could not get that. I do know that I bet the big declines we saw today in the complex can reverse.
More important, everything on the diversification side of the ledger was flying. Take Home Depot. This one has just been killing us at the Cramer Trust. But suddenly it is up $9, more than 3% today. Why? Well, we've been having these Treasury bond auctions. I've been talking about them with you. I know I've been putting you to sleep. I try not to do that. And how the new goal is to be able to sit on your hands, not buy anything until the auction is over.
Well, the auction was over. We got a 30-year auction today, last round of auctions. And once it was over, it was as if interest rates breathed a sigh of relief. There was a sense of what could happen to the beaten-down retailers if rates are going to go down or at least stop going higher. Home Depot is a classic diversification stock, people.
It's been hurt by the higher price of oil. You put off your repair and remodeling because of the pump. People aren't buying houses anywhere near the pace we hoped, given that mortgage rates have gotten too high. You don't want to give up your 3% mortgage for an 8%, right? Morris even talked about it. He said he's in real estate. He says people with that 3% mortgage they got during COVID, they don't want to swap out of it for these new high ones. Even if they sell, it's like a giant penalty.
But then you have to think Home Depot selling at less than 19 times next year's earnings. It yields 3.15%. It's historically low, like McDonald's. You have to buy Home Depot when it's out of favor because you're just going to end up chasing it much higher, maybe to 400 once rates start coming down. Today was a sneak preview of what will happen to this stock when the bond market calms down and perhaps oil one day goes lower.
Now, we know that with oil up big and inflation spreading throughout the whole system, you're not going to see rates down big anytime soon. We heard last time from a Fed governor, real smart, Christopher Waller, that he's signaling that we could have two more rate hikes. That's not a shock, but it was a tough-to-read speech. Unless the president or Congress finds a way to subsidize new mortgages like they're doing right now, the People's Republic of China just started doing that, there's no real reason to buy the stock of Home Depot now. But see, that's the point.
Although parts of my trust portfolio have been getting hurt by high interest rates, it's been made up for by the artificial intelligence trade and our much higher-than-usual cash position, which brings me to the real point of diversification. If you had nothing but artificial intelligence stocks today, you know what would have happened? It would have been a nightmare, especially if you bought them at the high.
If you own nothing but data center companies, there's a very good chance, and I've seen this time and again, that you might just say, you know what, I can't take this pain. I can't take these losses. I'm going to sell everything. I have to go into cash. Just like so many did in 2001, never came back. 2009, never came back. 2021, never came back. These people missed the moves of a lifetime because they were in one sector and it got obliterated, and they got left behind when millions and trillions of dollars were being made.
My goal when we started this show 22 years ago was and is simple. I want you to stay in the game. The only real way to make that happen is to be diversified. You can't stay in the game without it. You will indeed get blown out.
Here's the bottom line. Do you know how much I hated owning the stock of Home Depot? The answer is about as much as I loved it today because it's keeping me in the game on days like this one. Oh, and as far as OpenAI, I'm sure in a couple days we'll find out that the accounting and the AI story isn't apples to apples. The AI trade will be back in action. In the meantime, as I tell club members, cash and stocks not impacted by the data center will tide you over and keep you in the stock market. The only way to make really big money: don't trade, own. Ty in Arizona. Ty.
Mr. Cramer, how you doing?
I'm doing well, Ty. How you doing?
Doing good. I admire many things about you. Your energy. I love the book, "How to Make Money in Any Market." Your willingness to teach and how easy it is to follow you and what you're teaching. And lastly, I really admire your accountability. So, I called you about six months ago and we talked about AXP, and you've consistently praised Squeri and his team as top-tier managers.
But when a company maintains its full-year earnings guidance while repeatedly missing top-line revenue expectations, and insiders are offloading tens of millions in stock, that usually points to some underlying structural pressure. I look at Jane Fraser at Citi, Vlad Tenev at Robinhood. They're holding up their end of the bargain, and the stocks are holding up theirs as well. At what point are we going to stop giving American Express management a free pass for a market overreaction and start holding them accountable for overpromising on growth?
Well, I know there was some difficult news tonight about American Express that I think did contribute to some after-hours trading. It's not possible. Let me say they were fined $350 million for lapses in a money laundering situation. But let me just say this. I want to make this point. First of all, you're absolutely right. It's down 16%. So you could say, if I listen to Jim, I'm down 16% on American Express.
Buffett liked it, which is kind of forever. I think that it's a premium card. I like the situation. Younger people are getting it. It is not necessarily the right time. As you said yourself, I know that if you bought American Express when I said to buy it, you would have gotten it much lower, but you might have gotten it higher, too. So here's my case. It is underperforming right now, but we must make allowances for great brands and CEOs that underperform, or else we're never going to be in great stocks.
There are moments of underperformance for all of the best stocks, and this is one of them for American Express. But thank you, and yes, hold me accountable. Hold me accountable, because that's why I do this show, to be able to come to you and tell you I got it right or I got it wrong. And here's why. I need you to stay diversified. That's the only way you can stay afloat on a day like today where it really was horrible if you just own the stocks that are the hottest ones in the last few months.
On Mad Money tonight, gold prices are down strong on a stronger dollar today. So what's the path forward for this precious metal for the rest of the year? We know it's supposed to be the right time to buy. You know what? I'm going to get some color from the CEO of Agnico Eagle. Then PepsiCo just cut its forecast, but the stock went higher. Why are people taking a soda bottle half-full outlook for this company? I'm going to explain. And Everpure is up like crazy as the storage stocks boom, or at least today. Is it too late to get in on the company? I'm sitting down with the CEO. So stay with Cramer.
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On Monday, we ran an Off the Charts segment featuring work from Carly Garner, who for the first time in a long time had turned bullish on gold. Very bullish. So tonight, I want to dig deep with my favorite gold miner. That's Agnico Eagle Mines. For most of the past few years, gold prices have levitated some of the worst inflation in decades. Especially metals been pulling back recently. Agnico Eagle remains one of the lowest-cost producers, meaning if we had a rebound in the precious metal, this was going to roar.
So, let's check in with Ammar Al-Joundi. He's the president and CEO of Agnico Eagle Mines. Get a better sense of how the gold business is doing. Mr. Al-Joundi, welcome back to Mad Money.
Yeah, it is always a pleasure. You know, I've been a longtime fan and I always enjoy these talks.
Well, I thank you, and the same about you and your predecessor. I do want to ask you, I know you're not a person who recommends trading in and out, and I don't blame you because that's not the way people make big money. But there are people who have never thought about buying a gold stock before who are watching, or others who don't understand the idea that it can be great business. Historically, this has actually been a decent time to buy, to actually start a position at Agnico Eagle. Correct?
There are different forces at work, right? I mean, we've got Indian weddings, we've got Chinese buying there. It tends to be a low point. Correct?
It is a low point this time of the year. And Jim, as you know, all the factors that have pushed gold up for the last 20 years, and I think the average audience member doesn't know how much gold has moved. You know, gold has moved from $250 an ounce in and around the year 2000 to about $4,200 today.
All of those factors that have pushed gold, you know, governments printing a lot of money, concern these days, central banks around the world, the biggest buyers right now are central banks around the world. They're not dummies. They're looking at what's happening around the world. They're worried about access to their US dollars in their reserves. So they're moving towards gold. So, you know, gold is, it's really, it's a good time, frankly, in my view, and I'm biased naturally. It's a great time to be in gold.
Well, I also want to point out, as you know, that you can be diversified, you can own a lot of gold, and it is your quiet period. I'm not going to talk to you about earnings, but you have a different philosophy. You spoke at an industry event last week, the Mining Forum Americas, and you spoke about how Agnico Eagle's strategy is a bit different because you focus on regions that have the most geological potential for multiple mines over multiple decades and the political stability to allow us to operate multiple mines over multiple decades.
I think people would say, of course, but the truth is no. You're the only one that has that philosophy written in stone.
Well, you know, it's a strategy, Jim, that's worked for us for 70 years, and you've been following us longer than most. And it's really, if you bear with me, this is the crux of it. There's nothing wrong with going all over the world to find resources. I get that. But our view is that if you can have a dominant position in some of the best gold resources and potential in the world, if you can have a dominant position, now what makes you good? That's the right question.
You can't say I'm smarter than somebody, I'm harder working. But what you can say is I know every single junior, I know the suppliers, I know the contractors, I know the community. I have half to one-third the turnover rate of my peers, and you get that, Jim, from going into places where you know there's a lot of gold, and you know you can operate, and you know you can create a competitive advantage.
I think that is eloquent, and I want to add something else that you've taught me. Instead of just looking at how many mines you have, whatever, you want to look at what the equivalent of same-store sales for retail is. You want to look at production per share, which is a brilliant way to figure out organic growth. Correct?
100%. You know, my job is to make our investors money, and our investors invest per share. So, by definition, that's my job. And you know, it's easy when you're a big company, Jim. It's easy to go out and buy other companies. What's hard is to do it so that you're actually making money accretively on a per-share basis. And that's all we focus on.
I think that's right. Now, I do want to ask you, because I'm not allowed to own stocks. We buy gold, okay? We put it in a deposit box. Don't put it in the backyard or anything. I often feel, why am I stuck with gold when I could buy Agnico? But I got to be true to my contracts. Can't buy. But which do you advise? Do you ever just say to people, look, you can own our stock or you can go buy gold?
Well, the first thing I would say is, are you constructive on gold? Because if you're not constructive on gold, don't buy either. But if you are constructive on gold, the only reason, Jim, you should buy an equity instead of an ETF, because let's face it, equities have more risk than an ETF. You know, an ETF, you buy it, somebody's got it in a vault somewhere. That's safe.
But what I would say is, in the last 20 years, if you bought an AEM share, the amount of gold you own has gone up by a factor of three. And this gets to your point about production per share. We've grown production per share by a factor of three. So, not only do we give you more leverage when the gold price goes up because we have a cost base, not only do we control costs, but we actually give you more production per share, and actually we've got a plan to continue to do that for the next 10 years.
Now, at the same time, and I listen to that and I'm all in on that view. I know there were people who told me, Jim, you didn't get us into Bitcoin. I actually did recommend Bitcoin for a while and do own some Bitcoin because I like to be diversified where I'm allowed to be. But the fact is, gold's up over the past year, gold has basically flat out just 2%. Bitcoin is down 34%.
I know that Shawn Boyd told me one day this could happen, and maybe it's going to be more than just short-term. When you look at the two, or when people ask you, they say, look, I'm getting hurt in Bitcoin. What do you think? What do you say to people?
Well, look, I don't like to knock anything else, but I just look at this very fundamentally, which is that gold's been around a long time. Look, let's face it, governments do not want alternate currencies. They don't. And anybody who tells you they do is misleading you. It's important for governments to control their own currencies.
And so they can control Bitcoin, but they can't control gold. And so, I mean, if you're the central bank of China and you want diversification, there's a reason you're buying gold. If you're other countries, there's a reason you're buying gold, because it cannot be controlled by somebody else. And that sovereignty of currency, Jim, is critical.
And frankly, I'm not convinced that Bitcoin has that same sovereignty because, you know, I could be wrong, but I think it can be controlled by governments if they really wanted to.
Well, look, I think that that's a valuable input. I'm agnostic on this. And I do wish I could own Agnico Eagle because I would, that I wouldn't have retired, because I'm not retired, but you and Sean have run a fantastic operation, the best in show. That's why I'm always thrilled to have you on the show. That's Ammar Al-Joundi, CEO of Agnico Eagle Mines, AEM, and it is the best. Thank you, sir.
Thank you. It's always a pleasure.
Mad Money's back in for the break.
Coming up, as PepsiCo pops the top on another quarter, Cramer's taking a bite out of the company's numbers next.
All right. Well, what in the world is happening to the stock of PepsiCo here? This morning, the beverage and packaged food giant reported a solid set of results, but did something that Wall Street absolutely hates to see. They cut this full-year earnings forecast. And what happens? The stock actually rallies 3.7% today.
Yes, PepsiCo stock rallied on a guidance cut. So, if you're scratching your head wondering how a stock rallies in response to lowered guidance, let me walk you through what happened here, because it is quite rare. See, PepsiCo's lowered forecast was widely expected. They didn't take anyone by surprise. And on top of that, we did get a bunch of unexpected positives in the quarter.
Plus, it's not like Pepsi was priced for perfection going in. I mean, the stock peaked at just under $197 in May of 2023. That was just before the GLP-1 weight loss drugs took the world by storm. Like most of the snack food plays, the company never really recovered, and the stock closed at 123 and change yesterday. That was its lowest level since April of 2020.
Now, back in early February, it seemed like PepsiCo had finally found its footing. The company reported a solid quarter with great guidance. So, the stock ran from $153 at the end of January to $171 at its peak on February 12th. At the time, they were talking about 2 to 4% organic revenue growth this year and 4 to 6% core earnings growth on a constant currency basis. 4 to 6 are the numbers you got to remember. While that's nothing earth-shattering, it's pretty good for a slow and steady food and beverage play.
But that was right before the Iran war got rolling, causing a spike in oil prices, which translated into higher inflation across the board, and worst of all, higher interest rates, competition to PepsiCo's bountiful dividend. PepsiCo has significant shipping costs, and they also have tons of plastic packaging which is made from oil and natural gas. So the stock drifted lower through the spring and summer, even as the company kept reporting strong quarters, because they never raised the guidance, though.
Remember, when you beat the earnings estimates but leave your full-year forecast untouched, Wall Street senses that it's an implicit guide down for the rest of the year.
Now, as the price of oil stayed high and the Fed started raising short-term rates, PepsiCo stock kept drifting lower along with the vast majority of consumer-facing stocks. You know that even though Pepsi has that bountiful dividend I just mentioned, its 4.6% dividend yield, that doesn't offer much protection against a 10-year that's kind of like a moving target. Treasury is paying 5.23%. By the time we got to last night's close, the stock was already down 28% from its February high. 28%, PepsiCo. Wow.
All right. Then this morning's report comes out. Once again, PepsiCo posted a robust top and bottom line beat. Organic revenue growth was 3.1% when the analysts were only anticipating 2.7%. Net revenue grew close to 6% year-over-year, again beating expectations. And the company earned $2.34 per share, 5 cents better than expected and up 2% year-over-year.
North America PepsiCo savory snack food volumes are on the rebound thanks to price cuts. The North American beverage business was up 5%, primarily because of acquisitions made last year like Poppi, the prebiotic soda brand. These could be a billion-dollar brand. The company's smaller international segment continues to do well too, with growth in every major region.
Now, their core operating margin did shrink by 35 basis points thanks to higher fuel and packaging costs, even as they mitigated that damage with productivity savings and tariff refunds. But the real story here is not the quarter, which was solid. It's the outlook. On the top line, PepsiCo codified its organic revenue growth guidance at 3%. Previously, they've been using a 2 to 4% range. That's okay. If you throw in currency fluctuations and acquisitions, their net revenue growth outlook is now 6%. That's the high end of the previous range. Not too shabby. Still on target.
But here we go. Unfortunately, PepsiCo also cut its core earnings growth, and it cut it in half. Previously, they've been talking about 5 to 7% growth. Now, it's 2.5 to 3.5%. And they cut it even harder on a constant currency basis, from 4 to 6% down to just 1 to 4%. So, why did they cut that earnings forecast? And more important, why did Wall Street react with relief rather than panic?
Okay, let's consider the guidance changes. In total, there's nothing wrong with PepsiCo's sales. They just reported their best organic growth number since the fourth quarter of 2023. Management seems confident they can keep growing at a 3% clip for the full year. I like that. Basically turned the core business around. Some of that is by cutting price. That's right. People, once they saw prices lower, they started buying. Some of that's offering smaller-size snacks. A lot of that's for the GLP-1 crowd. Some of it's more aggressive marketing. Some of it's innovation. Lay's made with olive oil.
But the point is, Ramon Laguarta is doing many things that are now working. Now the problem is all these things cost money. And PepsiCo wants to keep up the spending to prevent any backsliding. At the same time, they're also getting squeezed by the war with Iran thanks to higher fuel and packaging costs. PepsiCo has been cutting costs where it can to mitigate the impact, but they can only do so much. Although they tell me, they told me they can still do more.
Still, the main reason for the lowered earnings forecast is that the company's chosen to take on a bunch of additional costs in order to promote their products and take market share. Given that those investments have been paying off, why in the world should they stop them just to please Wall Street? Most importantly, Wall Street didn't care about the lower earnings forecast because everyone knew this was inevitable. It's why PepsiCo's been selling off so aggressively over the past eight months.
And look, the new guidance could have been a lot worse. A lot of people thought they'd hear the company was being eaten alive by higher costs. Instead, we got a nice story about how Pepsi's investing to maintain its revenue growth. Is the stock a buy here? Now, this is really important. Like last night when I talked about Constellation Brands, Modelo, Corona, it's far too big a leap to say that PepsiCo is fully out of the woods here. Not when there are so many secular challenges they're facing.
But the bottom line, between the sequence of events today which de-risked PepsiCo's earnings outlook for the year and restored confidence in the revenue growth, and the fact that PEP trades at just 15 times the midpoint of new earnings forecast, down from the high 20s, by the way, three or four years ago, I'm feeling a lot better about this story. You could do a lot worse than buying the stock of PepsiCo down here, especially if one day the war with Iran ends and oil plummets.
And hey, even though that 4.61% dividend yield doesn't offer much protection, the high interest rate environment still gives you real income, and you can take that real income to the bank. Let's go to Bal in New York, please. Bal.
Oh, yeah. Jim. Hey, what's up? Before I jump into the stock, before I jump to the stock, I got to ask you something. He's on my fantasy team. The guy's a stud. But when are we finally getting a Saquon touchdown?
No, Saquon's not going. He's not going to London.
No, I don't think. If he goes, he's going to be a decoy.
Well, no, he's not playing. I mean, you can't play Saquon.
He said when's he going to get a touchdown?
Well, I mean, you know, look, look, it's about as, I mean, I'm not sure, but I mean, the guy's hurt and the line's bad and the offense is a little bit of a shambles right now. So, I think you got to look elsewhere. I also, by the way, I'm trying to figure out whether they play Dontayvion Wicks or even, you know, Carr. Pick another offense. Let's do a stock.
