Was this selloff warranted? After listening to the conference call and analyzing the results, Cramer said absolutely not. He first criticized Stanley's management for its ludicrous policy of holding its conference call at 10am the day following their earnings release. That policy single-handedly created an information vacuum that was largely responsible for the collapse in its share price, Cramer concluded.
But what of the earnings? Cramer said there was indeed a 3 cent miss, but 2 cents of that was caused by a higher tax rate, not a decline in sales. In fact, revenue was up 12% along with free cash flow and several other key metrics for the company. Additionally, management noted that it has not yet realized full synergies from recent acquisitions and input costs are also declining in the second half of 2012.
Cramer said the Stanley fiasco was clearly a situation of out-of-control expectations, with a stock that had risen 66% from the October lows and more than 16% so far this year. The information vacuum further exacerbated the problem by leaving investors to their own devices without any guidance from the company.
With shares trading at just 11 times earnings, less than their historical average of 14 times earnings, Cramer said that Stanley Black & Decker is still a great story, albeit one that wasn't told correctly, or in a timely manner. He remained bullish on the stock.
Executive DecisionIn the "Executive Decision" segment, Cramer sat down with David Cote, chairman and CEO of Honeywell (HON), a company dedicated to energy efficiency solutions for businesses and consumers alike. Shares of Honeywell are up 40% since Cramer first recommended it in September 2010. Cote described Honeywell as a "portfolio of opportunities," noting that even though there is weakness in area like European auto sales and U.S. commercial construction, Honeywell is still doing well. He says the company is positioned to grow as soon as the economy recovers. In areas like China, Honeywell is seeing growth of 20%, despite short-term weakness in that part of the world. Turning to the real focus of the interview, green technologies, Cote said that in order for "green" products to work, they must make economic sense. Which is why items like their Internet-connected thermostat makes sense. Cote explained that up to one-half of a home's energy usage comes from heating and cooling and Honeywell can save a home-owner 30% of that cost without sacrificing comfort.
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