Earnings Lessons Amidst a Macro-Driven Market
By: 
From: James Cramer
Sent: Wednesday, June 06, 2012 3:52 PM
To: Nicole Urken
Subject: Diageo / Brown Forman
Let’s look at why these rallied so much. I think we need to do another “taste” test of the liquor players.
From: Nicole Urken
Sent: Wednesday, June 06, 2012 4:13 PM
To: James Cramer
Subject: RE: Diageo / Brown Forman
Will look into further. For BF.B, while it was a headline miss, there were strong underlying results (organic sales strong esp for Jack Daniels brand family with price increases coming). Case of headline vs underlying results once dig deeper… plus defensive name with growth
From: James Cramer
Sent: Wednesday, June 06, 2012 7:07 PM
To: Nicole Urken
Subject: RE: Diageo / Brown Forman
Might be a good piece just to go over how to understand headlines v. reality cause when you read the headlines you thought it would be down huge—a real good primer for us. Let’s get on it.
In the tug of war of micro versus macro driving the stock market, macro is winning — particularly with the early summer pause to corporate earnings reports. And right now, macro has frequently been tied to rumors as many questions remain on policy action in the euro zone as it relates to the region's sovereign debtcrisis. However, we continue to gather important data from individual companies that help inform us about the pulse of the market — one that forever remains irregular and uneven.
As we have always emphasized on "Mad Money," when it comes to individual names, it is key to be particularly aware of all driving factors for a stock around earnings. In addition to understanding how the underlying business is doing, it is crucial to be aware of 1) expectations (and associated stock action/valuation heading into the print), 2) the key metrics — sometimes backlog or organic growth are more important that earnings per share after all, and 3) pin action from other companies in the same cohort.
On "Mad Money," we dissected the quarter of liquor name Brown-Forman last Friday where the headline did not accurately reflect the solid growth and pricing for the underlying brands — not to mention that the stock is well positioned in the current environment.
Given that we have seen some very strong stock price moves after company earnings, here’s a look back at some additional take-aways from recent reports.
Read on for Earnings Lessons Amidst a Macro-Driven Market
Tempur-Pedic (TPX)
Shares of matress maker Tempur-Pedic fell a cool 49 percent after if gave a guidance warning last Wednesday before the open. Could it be that foam mattresses are good for sleep but not for sex, as a Barron’s article played fun with back in May? Is it no longer “chic” to catch some Zs?
Ultimately, the culprit for Tempur-Pedic is intensifying competition, especially in the specialty mattress market — which puts even better positioned names like Select Comfort at risk as well. Tempur-Pedic also has not appropriately managed expectations and the company has European exposure to boot.
