So much attention is given to a company ahead of its earnings release, Cramer said Monday, but little time is spent on the company after its results are out. But the "Mad Money" host thinks analyzing a company's earnings and how its stock traded afterwards is worthwhile because it can make you some money.
Take McDonald's , for example, which reported earnings before Monday's opening bell. Its results met the average analyst's expectations, but saw its stock open down about 1 percent. Shares turned around intra-day, but closed down 37 cents.
"The action in McDonald's is frankly emblematic of the way stocks really trade during and after they report earnings," Cramer said. "If you understand what to look for, what's important during the crucial minutes and hours after a quarter, then you won't get confused. You won't get misled and you certainly won't panic because in the future you'll know what to do."
So what happened? Before the bell, McDonald's reported $1.16 of earnings per share, meeting analysts' expectations. It also posted $6.21 billion in revenues, which is slightly lower than the $6.22 billion the Street hoped for. The slight revenue miss wasn't the reason the stock fell, though, Cramer said.
For restaurant stocks, Cramer said comparable or same-store sales are the "all-important" key metric. In other words, it's what McDonald's trades off of. In early December, the hamburger joint reported weak November comps. In turn, expectations for for December comps weren't very high. But on Monday, McDonald's not only posted weaker-than-expected comps for December, but also for the full quarter. In addition, its European comps were especially weak. Speaking of Europe, the continent accounts for 36 percent of McDonald's profits. In November, McDonald's said Europe was getting better from the lows. This quarter, however, it seems to only be getting worse.
All that combined and the stock pulled back, Cramer said.
The "well-run" business that it is, Cramer said people expected McDonald's to beat and raise. Instead, it simply met expectations and gave investors a host of things to worry about, like weaker-than-expected comps, European weakness and higher commodity costs. In turn, the stock fell in early trading Monday.
McDonald's executives led a conference call Monday morning, where they addressed all of the major concerns, Cramer said. Executives blamed the weak comps on the weather and said the underlying trends in Europe remain strong. Management also said food inflation is manageable and that they "feel pretty good" about their ability to raise prices while balancing traffic growth with recovering input costs. They also revealed that they're gaining market share, particularly in Europe. The company is also seeing upside from productivity improvements, remodeling at various locations and announced plans to open 1,100 stores in the next year.
In the end, what looked like a rout at the beginning of the day turned into a touchdown thanks to McDonald's skillful handling of its conference call. Trading at 15 times earnings with a 10 percent growth rate, Cramer thinks it won't be long before analysts upgrade this "cheap" stock. When that happens, Cramer said the stock could go higher.
"When a company reports in the morning and its stock gets knocked down like McDonald's, you need to think about whether management will be able to assuage the worries of the analysts and turn the stock around," Cramer said. "If so, it could be a good buy like Mickey D's was this morning and continues to be right now."
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