During Monday’s “Mad Money,” Cramer told viewers what Kimberly-Clark needed to do if its stock was going to pop following its fourth-quarter earnings report: Surprise Wall Street by merely matching its already-low expectations and address the concerns left over from Q3.
Well, the company did just that and more. While 2011 guidance was in line with analyst estimates, Kimberly-Clark beat on earnings by 5 cents. And on top of this, management—just like Cramer said they should—addressed those third-quarter worries on the conference call that followed. It even boosted the dividend, discussed a much-needed pulp and tissue restructuring and announced a buyback in the first paragraph of the press release.
Of course, the company isn’t totally out of the water. There are still cost pressures, market share issues and private-label competition to worry about. But as Cramer said, “The company did what it needed to do this quarter to put itself back in play.”
Hence KMB opening up 3 percent and staying in the green all day Tuesday, despite what was largely a bad day for the averages. Cramer said it’d be a “total gift” if the stock were to dip back down to pre-quarter levels, but he doubts those levels “are going to be seen anytime soon.”
What’s the takeaway for investors at home? Think of earnings in context of expectations.
“The better you understand the expectations about key issues going into the quarter,” Cramer said, “the better you’ll be able to make sense of post-quarter action in the stock and profit from it.”
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