Stocks to Watch: Mercury Heats Up, MSC Industrial Plunges

The Day's Winners

Mercury Computer (MRCY Quote - Cramer on MRCY - Stock Picks) was climbing 28% to $21.02 after beating estimates and forecasting higher results for 2003. The company earned 24 cents a share in the fourth quarter, down from 37 cents a year ago, but ahead of analysts' estimates of 20 cents. Revenue for the quarter was down 12% to $43 million. Looking ahead, Mercury forecast earnings of 90 cents to $1 a share on revenue of $170 million to $175 million. The stock was upgraded to buy at SG Cowen on the earnings surprise.

Shares of Exelixis (EXEL Quote - Cramer on EXEL - Stock Picks) added 3% to $5.20 on news that the company and partner Bristol-Myers Squibb (BMY Quote - Cramer on BMY - Stock Picks) have completed a selection of cancer targets, which will trigger a "significant milestone payment" to Exelixis. The companies partnered in July 2001 to identify various targets that can cause cell death in cancer cells without harming healthy cells. Each company can claim worldwide rights for an equal number of validly identified targets.

Internet service provider Earthlink (ELNK Quote - Cramer on ELNK - Stock Picks) tacked on 11% to $5.22 after the company's board of directors authorized a $25 million buyback of stock. The company will repurchase the stock from time to time based on price and market conditions.

Luxury homebuilder Toll Brothers (TOL Quote - Cramer on TOL - Stock Picks) added 5% to $21.60 after preannouncing third-quarter revenue well above the consensus estimate. The company said its homebuilding revenue fell 1% to $565 million from $573.5 a year ago, but easily beat estimates calling for total revenue of $508 million. Toll Brothers also said it has secured $704 million in signed contracts, a 21% increase from a year ago and had a record backlog of $1.90 billion.

The Day's Losers

Shares of Forest Labs (FRX Quote - Cramer on FRX - Stock Picks) dropped 6% to $68.10 after the Food and Drug Administration requested additional information on its hypertension treatment. The regulatory agency issued an approvable letter for the drug, but said it requires more information, which, after discussions with the FDA, Forest Labs expects to be able to provide in the next several months. Subject to an FDA review of this new information, the company expects to launch the drug in the second half of 2003.

MIM Corp. (MIMS Quote - Cramer on MIMS - Stock Picks) was falling 10% to $9.87 after the company reported lower-than-expected second-quarter results. The pharmaceutical healthcare company posted earnings of 19 cents a share, up from 15 cents a share a year ago, but a penny less than the consensus estimate of 20 cents. Revenue rose almost 30% to $135.7 million, but fell short the $141.8 million consensus. The company didn't provide any specific guidance for the third quarter, but said it was on its way to delivering on its 2003 forecast.

Retailer Limited Brands (LTD Quote - Cramer on LTD - Stock Picks) lost a little more than 1% to $15.90 after a downgrade from Banc of America. The brokerage cut its rating on the stock to market perform from buy on valuation concerns, citing macroeconomic risks for the company's Bath & Body Works in the fourth quarter and less than wholly enthusiastic feedback from teens on Express.

MSC Industrial Direct (MSM Quote - Cramer on MSM - Stock Picks) fell 36% to $9.88 after the company said it will restate its results for the last four years to correct overstated net income. The company blamed more than $8 million in overstatements on "incorrect accounting entries" used when dealing with inventory purchases. The restatement will lower 1999's net income by $2.8 million, 2000's by $4.2 million, 2001's by $900,000 and 2002's by $400,000. MSC said its independent board is investigating the errors, and the company has "tightened its internal controls."