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Cramer's 'Mad Money' Recap: Barista Set High for Starbucks

TheStreet.com Staff

Click here for an archive of Cramer's "Mad Money" recaps.

When a company does everything right, its stock will go higher -- which is exactly what happened with Archer Daniels Midland (ADM Quote) and Boeing (BA Quote), Jim Cramer told viewers of his "Mad Money" TV show Thursday.

But when you have a great stock, "good is not good enough," he said. "To really impress the Street you need to have better-than-expected earnings."

Starbucks (SBUX Quote), for example, did a good job, but it needed to do a great job, Cramer said. But people can still own it if the stock starts to accelerate, he added.

He welcomed Howard Schultz, founder and chairman of Starbucks, onto the show and asked him if his company still has its mojo.

Schultz, who said he "couldn't speak of" what happened to the stock, said that it isn't true that Starbucks has hit a wall. "If you look at the quarter, the underlying factors were so strong," he said.

Moreover the Starbucks' card growth "demonstrates the hidden opportunity we have," Schultz continued. Plus, the company is getting ready to open in Russia and India this summer, he said.

The Street's expectation is one thing, but after having been around for years, Starbucks, is still showing growth in sales and profits, Schultz said. He added that during the quarter, the company also gave a wage increase to its workers -- "an investment in the most important asset we have."

When Cramer asked if Starbucks is paying more to put up its new stores, Shultz said that "for the balance of this year, all of Starbucks real estate is done." In other words, Starbucks has already signed leases for the stores it said it will open this year, the chairman said.

In addition, because the coffee chain is opening stores in drive-throughs and at highway rest stops, its expenses in terms of real estate are no higher, Schultz said.

"We know how to do this," the chairman said.

Cramer told viewers that in the case of Starbucks, they must take a longer-term perspective. If people look at an 18-month picture of Starbucks, it might not add up. But in five years it should, he said.

Though Schultz tells a good long-term story, Cramer said he's not sure if people should pull the trigger short term.

To view Cramer's interview with Howard Schultz, please click here.

No Fries With That

A week ago, when Danny Meyer, restaurateur and author of Setting the Table: The Transforming Power of Hospitality in Business, visited Cramer on the set, unknowingly Meyer showed Cramer how to get the multiple for restaurant companies.

Finding the multiple -- something usually decided by money managers -- is how market players can get their edge over the Street, Cramer said. Each sector has a key metric, and for the restaurant industry, the secret sauce is hospitality, he said.

Meyer told Cramer that he liked Chipotle (CMG Quote) not only because of its food but also because of its hospitality and how the management builds a spirit internally to make customers feel at home.

Now that viewers know the subjective side of Chipotle's story, they can understand why it's more valuable, Cramer said.

On the other hand, Ruth's Chris Steak House (RUTH Quote) rates lower, even though it's a high-end restaurant, because you don't get your money's worth with the American beef it serves, Cramer said. "The quality is the problem."

Also, Darden Restaurants (DRI Quote) has a low multiple because there is nothing special about Red Lobster or Olive Garden in regard to the food, the service or the hospitality, Cramer said.

Therefore, even though Chipotle is the most expensive stock, it is worth it because its key metric is high, he said.

Sell Block

In his "Sell Block" segment, Cramer told viewers to sell and take profits in Boston Scientific (BSX Quote).

He also advised people to do some schnitzeling with Gilead Sciences (GILD Quote) but to feel free to stay in it for the long haul.

Cramer urged market players to sell Laureate Education (LAUR Quote) now, as its CEO just announced a leveraged buyout for the company.

Moreover, he said that getting behind 3M (MMM Quote) was a mistake and that its last quarter was "awful."

"Management and Cramer lost their ways on this," he said. "If you own it, sell it."

Cramer also told viewers to sell Smith & Wesson (SWHC Quote).

Cramer welcomed American Standard (ASD Quote) CEO Fred Poses to the show and congratulated him on his stock's brilliant move Wednesday.

"We had a big fourth quarter, good outlook for 2007 and a plan that said we have three great businesses and that it's best to separate them and treat them as three separate businesses," Poses said.

Playing the devil's advocate, Cramer asked if American Standard is selling its kitchen and bath unit at a low.

Poses said it is a great business, but he doesn't believe the company is selling it at a low. The potential buyers will understand the value and pay for its bright future, he said.

"Unlocking shareholder value is what we look for, and you did it in one swoop," Cramer told Poses. "I'm a bull on American Standard."

During his "Sudden Death" round, Cramer was bullish on Yamana Gold (AUY Quote).

He was bearish on Mannatech (MTEX Quote) and AnnTaylor Stores (ANN Quote).

Lightning Round

Cramer was bullish on Freeport-McMoRan (FCX Quote), Cemex (CX Quote), Microsoft (MSFT Quote), Hewlett-Packard (HPQ Quote), Comcast (CMCSA Quote), Level 3 Communications (LVLT Quote), Adobe Systems (ADBE Quote), Halliburton (HAL Quote), Volcano (VOLC Quote), United Technologies (UTX Quote) and American Standard (ASD Quote).

Cramer was bearish on American Oriental Bioengineering (AOB Quote), Anixter International (AXE Quote) and Chesapeake Energy (CHK Quote).

For more of Cramer's insights during the Lightning Round, click here.

Want more Cramer? Check out Jim's rules and commandments for investing from his popular book by clicking here.