GEHC’s unwarranted post-profit plunge is a buying opportunity

Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch—an actionable afternoon update just in time for the final hour of trading on Wall Street. (We’re no longer recording audio so we can get this new written feature to members as soon as possible.) April Showers: The Dow, S&P 500 and Nasdaq end a bad April on Tuesday The performance was poor and snapped their five-month winning streak. It’s fairly rare for stocks to fall in April, as it’s typically one of the strongest months of the year. Bond yields moved higher again on Tuesday after another higher-than-expected inflation report before the bell. The employment cost index, which tracks workers’ wages and benefits, rose 1.2% in the first quarter, exacerbating concerns that the Federal Reserve’s 11 interest rate hikes since March 2022 will not be enough to curb inflation. Interest rate watch: The Federal Reserve begins its latest two-day policy meeting on Tuesday and will announce an interest rate decision on Wednesday afternoon. Federal Reserve Chairman Powell will hold a post-meeting press conference at 2:30 pm ET. No changes to policy are expected. The recent surge in inflation data has certainly quelled, if not eliminated, the rush to cut interest rates earlier this year. Jim Cramer has repeatedly said the Fed doesn’t need to cut interest rates anytime soon. Buy the Dip: Shares of GE Healthcare fell 13% to just over $77 after earnings on Tuesday. We admit that we should have taken a nominal profit on the club when the share price was around $90 last month. Jim said at the morning meeting that it was a mistake that he felt terrible about. But he also said now is the time to fight. That means the club is upgrading the medical device company’s stock to our equivalent of a Buy rating of 1. If there were no restrictions, we would be buyers on Tuesday. Although first-quarter revenue and profit fell short of expectations, GE Healthcare management maintained its full-year guidance. KING OF BEERS: Club name Constellation Brands fell more than 2.5% on Tuesday amid Molson Coors’ comments about weakness in the beer industry in April. TAP shares fared even worse, falling more than 8% intraday. However, recent scan data shows that Constellation’s beer portfolio, which includes Modelo and Corona, is not slowing down significantly. Club Earnings: In addition to GEHC’s earnings, Eli Lilly and Company and Eaton Co. also reported earnings Tuesday morning. Shares of Eli Lilly and Company, the world’s most valuable drugmaker, rose 5.5% after the company provided strong guidance to clear up difficulties. Eaton shares fell more than 2% in afternoon trading after hitting a record high earlier in the session. The electrical components and power management company posted quarterly earnings growth and a guidance upgrade. Jim said Tuesday morning that investors who don’t own the stock should buy the dip. Next up: The Club earmarks Amazon and Starbucks to report earnings after the close on Tuesday. The growth of cloud computing unit Amazon Web Services (AWS) will be a major focus for investors. This is especially true after strong numbers from Microsoft Azure and Alphabet’s Google Cloud. We don’t expect Starbucks’ quarterly results to be good, but believe the sub-$90 per share share price already reflects this. Starbucks sales are weak in the U.S. and China. Will the recent Middle East boycott that hurt Starbucks continue to drag it down? They were aimed at McDonald’s, which reported a weak quarter before the bell. However, McDonald’s shares were unchanged on Tuesday, suggesting the decline has been fully reflected. —CNBC’s Jeff Marks contributed to this report. (See here for a complete list of stocks in the Jim Cramer Charitable Trust.) As a subscriber to Jim Cramer’s CNBC Investing Club, you will receive trade alerts before Jim makes his trades. Jim waits 45 minutes after sending a trade alert before buying or selling stocks in his charitable trust portfolio. If Jim talked about a stock on CNBC TV, he would wait 72 hours after issuing a trade alert before executing the trade. The investment club information above is subject to our Terms and Conditions and Privacy Policy and our Disclaimer. No fiduciary duty or obligation shall exist or arise upon your receipt of any information relating to the Investment Club. No specific results or profits are guaranteed.

Every weekday, CNBC Investment Club with Jim Cramer publishes Homestretch—an actionable afternoon update just in time for the final hour of trading on Wall Street. (We are no longer recording audio so we can make this new written feature available to members as soon as possible.)

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