Chattem was enjoying the post-earnings glow that came with tripling its fourth-quarter profit when the company was forced to recall its Icy Hot Heat Therapy products. Turns out the pain-relieving pads were causing first-, second- and third-degree burns on customers. Chattem stock has dropped about $11 since Feb. 8, the day of the announcement.
But CEO Zan Guerry was quick to call the market response an "overreaction." Icy Hot had been tested on over 400 consumers, he said, and "we saw nothing in our testing that would indicate there would be any problem whatsoever." If anything, the problems stemmed from misuse, Guerry added.
Chattem took a one-time write-down of about 20 cents a share, Guerry said, and there has been "no impact" on the company's other brands. Icy Hot's still up 6% this year, ACT mouthwash is up 40%, and Cortizone-10 and Selsun Natural are also doing well.
Cramer's recommendation: Wait for CHTT to sell off another 10%, "then the risk will finally be out."
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