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Cramer's earnings watch: 'If the banks get hammered, things could get ugly'

CNBC logo CNBC 7/13/2020 Tyler Clifford
  • "If the banks can rally, then maybe we've gone 'through the looking glass,'" CNBC's Jim Cramer said ahead of big banks' turn to report quarterly earnings.
  • "If the banks get hammered, things could get ugly," the "Mad Money" host warned.
  • "This is the week when we find out if the real world is going to intrude on the stock market world, and that's what happened today, but tomorrow's the big test," he said.

After a weeklong break from television, CNBC's Jim Cramer returned to his evening investment education show on Monday to give a preview of the earnings reports to come.

The "Mad Money" host warned that Wall Street is in a tough spot, with the big banks set to report results starting Tuesday.

"If the banks can rally, then maybe we've gone 'through the looking glass,'" he said. "If the banks get hammered, things could get ugly."

The comments came after the S&P 500 — which collapsed alongside the other major indexes earlier this year as the coronavirus outbreak took hold around the globe — managed to trade in positive territory during the trading session. But that proved to be ephemeral as the broad index ended up sliding nearly 1% at the close.

After making big gains early on, the Dow Jones finished up about 10 points, or 0.04%, at 26,085.80, and the Nasdaq Composite dropped 2.13% to 10,390.84 as a rally in big tech stocks lost its luster later in the day.

The market rose as traders ignored a continued surge in new positive Covid-19 diagnoses across the country. Additionally, Pfizer and BioNTech shares surged after their Covid-19 vaccine candidates received "fast track" recognition from the Food and Drug Administration.

"This is the week when we find out if the real world is going to intrude on the stock market world, and that's what happened today, but tomorrow's the big test," Cramer said.

He went on to present what's circled on his calendar this earnings week. All projections are based on Factset estimates:

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Tuesday: JPMorgan Chase, Wells Fargo, Citigroup, Delta Air Lines earnings

JPMorgan Chase

  • 7 a.m. Q2 earnings release, 8:30 a.m. earnings call
  • Projected EPS: $1.15
  • Projected revenue: $30.4 billion

"I don't know if JPMorgan's results will be good enough to offset those of Wells Fargo," Cramer said. "I think we'll hear a lot about bad loans from both of them, though JPMorgan has the balance sheet and diversification to handle the pain."

Wells Fargo

  • 8 a.m. Q2 earnings release, 11 a.m. earnings call
  • Projected losses per share: 16 cents
  • Projected revenue: $18.4 billion

"They've got a ton of personal loans and oil loans," he said. "No wonder they had to cut the dividend, but it is run by Charlie Scharf. He's going to figure it out."

Citigroup

  • 8 a.m. Q2 earnings release, 10 a.m. earnings call
  • Projected EPS: 35 cents
  • Projected revenue: $19 billion

"Now that Citi's had to suspend its incredible buyback, you've lost the best reason for owning this darned stock," he said. "It's cheap, but it could easily stay cheap."

Delta Air Lines

  • 7 a.m. Q2 earnings release, 10 a.m. earnings call
  • Projected losses per share: $4.16
  • Projected revenue: $1.39 billion

"The Robinhood crowd, they love the airlines, even as passengers seem to hate them. Will Delta need more help from the government?" he said. "If they say no ... you might want to buy American Airlines, which needs the most help, but only for a trade, please."

Wednesday: Goldman Sachs, UnitedHealth earnings

Goldman Sachs

  • 7:30 a.m. Q2 earnings release, 9:30 a.m. earnings call
  • Projected EPS: $3.90
  • Projected revenue: $9.76 billion

"I think they're going to blow away the numbers," Cramer said. "This market's a trader's paradise, which should allow an investment bank like Goldman to put up a remarkable quarter from all that great firepower they've got on the trading desk."

UnitedHealth

  • Q2 earnings results to be released before the market opens, 8:45 a.m. earnings call
  • Projected EPS: $5.24
  • Projected revenue: $63.48 billion

"This pandemic's been fabulous for the managed care space because all sorts of expensive surgeries keep being postponed," he said. "That could lead to a huge quarter, but the conference call spells out the future" and the future could be "murky."

Thursday: Bank of America, Morgan Stanley, Johnson & Johnson, Taiwan Semiconductor, Domino's Pizza, Netflix earnings

Bank of America

  • 6:45 a.m. Q2 earnings release, 8:30 a.m. earnings call
  • Projected EPS: 28 cents
  • Projected revenue: $21.8 billion

"They almost always report excellent numbers driven by their top-notch digitization strategy, but it never seems to matter," Cramer said. "The stock hasn't been able to rise above the rest of the group. No reason this time should be different."

Morgan Stanley

  • 7:15 a.m. Q2 earnings release, 8 a.m. earnings call
  • Projected EPS: $1.12
  • Projected revenue: $10.3 billion

"Morgan Stanley can talk about their merger with E-trade," he said. "I think it works for the same reasons Goldman does — almost no collateralized loan exposure."

Johnson & Johnson

  • 6:45 a.m. Q2 earnings release, 8 a.m. earnings call
  • Projected EPS: $1.49
  • Projected revenue: $17.6 billion

"They have a terrific pipeline, and they're super-focused on Covid," he said. "I bet they have a great quarter, but it might not matter, because this stock ran up hard today."

Taiwan Semiconductor Manufacturing Company

  • 2 a.m. earnings call
  • Projected EPS: $4.26
  • Projected revenue: $308.6 billion

"Perhaps the most important report of the week is … Taiwan Semiconductor, and that's because it has a huge amount of business with Apple," he said.

Domino's Pizza

  • 10 a.m. Q2 earnings call
  • Projected EPS: $2.24
  • Projected revenue: $914 million

"I think they tell a good story, as contactless delivery is the safest way to eat," he said.

Netflix

  • 4 p.m. Q2 earnings release, 6 p.m. earnings call
  • Projected EPS: $1.81
  • Projected revenue: $6.09 billion

"I think of Netflix as a worldwide entertainment service that's essential in the age of Covid-19. However, management tends to be pretty self-effacing," he said. "I would like Netflix into weakness."

Friday: First Horizon

First Horizon

  • 7 a.m. Q2 earnings release, 9:30 a.m. earnings call
  • Projected EPS: 13 cents
  • Projected revenue: $485 million

"This is a great regional bank, it is a top-notch franchise, it's in one of the strongest areas ... and it has branches all over the South," Cramer said. "It's amazingly well-run, and yet the stock sells for just seven times earnings and it sports a massive 6% yield."

Disclosure: Cramer's charitable trust owns shares of JPMorgan, Goldman Sachs, Apple and Johnson & Johnson.

Disclaimer

Questions for Cramer?

Call Cramer: 1-800-743-CNBC

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Video: Banks get crushed as Wall Street gets ready for earnings season (CNBC)

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