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Cramer: Did market punish the wrong stock?

After earnings, Panera marched higher while Buffalo Wild Wings tanked by 15 percent. That doesn't seem right.

Panera reported a 4 percent decline in quarterly profit while Buffalo Wild Wings reported a whopping 44 percent increase in profit. Surely the market got confused.

Wrong!

Jim Cramer said the price action makes all the sense in the world.

A sign is displayed outside a Buffalo Wild Wings restaurant in San Ramon, Calif.
David Paul Morris | Bloomberg | Getty Images
A sign is displayed outside a Buffalo Wild Wings restaurant in San Ramon, Calif.

To understand what happened and why, Cramer said it's important to examine the Street's perception of each stock ahead of earnings.

In the case of Buffalo Wild Wings, "Shares galloped from $96 to $167 in the last year. And in just the past two weeks it ran from $150 to $167." That kind of advance says the Street had very high expectations.

And when the Street has high expectations, it doesn't take much to spook investors. In the case of Buffalo Wild Wings, there was a modest blemish in the earnings. "It failed to guide up in a way that pleased Wall Street," Cramer said. It may have been a small misstep, but when a stock is priced to perfection, even a small misstep is punishable.

"Conversely, expectations for Panera were very low. "In fact, there were fears that Panera would slash next year's earnings and be very downbeat about the future. Instead Panera reported a 0.4 percent uptick in transaction growth, the first increase in six quarters. Also, CEO Ron Shaich noted that the reinvention of Panera that's being rolled out in Charlotte, North Carolina, is producing some real lift in the numbers."

The Street interpreted those developments as signs that the worst may be over for Panera. Hence the rally.

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Although the circumstances outlined above may seem obvious in hindsight, if you're an individual investor, Cramer thinks there's an important takeaway. Going into an earnings report, "No matter how great a company may be, it can get still get knocked. And, conversely, companies that simply aren't as bad as they used can be rewarded."

(Click for video of this Mad Money segment)

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