Cramer's 'Mad Money' Recap: Digging Deeper (Final)

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NEW YORK ( TheStreet) -- "I'm tossing out the red flag," Jim Cramer told his "Mad Money" TV show viewers on Wednesday.

He said that too many investors aren't doing their homework and are relying on the headlines alone, and that's why the markets have been so wrong about so many corporate earnings this quarter.

Cramer said the markets are still dominated by news from Europe, but that doesn't exempt investors from doing the homework, listening to conference calls and finding out what's really going on with a company's earnings. Skip this said, he said, and you're sure to lose money.

Consider Johnson & Johnson ( JNJ), which reported $1.24 per share in earnings versus estimates of $1.21. A solid beat, right? Cramer said absolutely not. Turns out Johnson & Johnson only gained from one-time charges and divestitures. Earnings were pitiful. Cramer continues to like private label drug maker Perrigo ( PRGO).

A similar story with Travelers ( TRV), which reported only 79 cents a share when the markets were looking for 83 cents. Did the stock plummet lower? Not at all. Cramer said earnings were light, but in the conference call the company revealed that it's writing new policies like crazy and pushed through a price increase, two things that will benefit the company for years to come.

Then there's Coca-Cola ( KO), a stock which Cramer owns for his charitable trust, Action Alerts PLUS . Coke seemingly disappointed with its earnings, but the company is seeing North American sales picking up and Coke Zero is growing like a weed.

Cramer said this is a most confusing earnings season and investors must remain disciplined and informed. Headlines alone are not enough. Skip the homework, he said, and you'll miss how this might be the last bad quarter for Goldman Sachs ( GS), which would make now a great time to start a position.

Big Natural Gas Finds

In an exclusive "Executive Decision" segment, Cramer spoke with David Demshur, chairman, president and CEO of Core Labs ( CLB), an oil service company that's up 72% since Cramer first recommended the company in February, 2010.

Demshur said that Core Labs is focused on international crude development. He said with the price of Brent crude still sky high, many projects are getting green-lighted. He said the company is excited about huge natural gas finds off the east coast of Africa and about new oil discoveries off the west coast of Africa as well. In the U.S., the Bakken and Utica shale fields also hold huge potential, he said.

New technologies is also helping the bottom line at Core Labs, as Demshur noted that his company is helping drillers drill longer horizontal wells which are delivering more oil initially and more oil for longer periods of time.

When asked about the company's surprising return on capital, Demshur said the company aims for every project to return 30% on its invested capital, but last quarter it was able to deliver a 39% return. Helping the company's margins is the price of specialty steel, which is on the decline since overall steel demand has fallen.

Finally, when asked about Core Labs curious pattern of its stock price falling after positive earnings releases, Demshur said that the trend supplies investors with opportunities to buy the stock at a great price. He said that Core Labs itself uses pullbacks and weakness in its shares to buy back stock.

Strong Outlook

In a second "Executive Decision" segment, Cramer welcomed in studio Klaus Kleinfeld, chairman and CEO of Alcoa ( AA), a stock whose shares got hammered after it reported earnings Monday. Alcoa is an Action Alerts PLUS holding.

Kleinfeld referred to aluminum as the "miracle metal," one that has infinite possibilities and is also highly recyclable. In fact, he said that 75% of all the aluminum ever produced is still in use today thanks to the metal's highly recyclable nature.

When asked about the company's business, he said that in the short term, weakness in Europe and falling commodity prices did lead to a disappointing quarter.

But, he added, Alcoa has beat expectations eight of the past nine quarters and longer term, the outlook is very strong. Kleinfeld noted that aerospace has a huge backlog, the automotive industry is picking up and aluminum is in high demand for everything from infrastructure to consumer electronics and packaging.

Kleinfeld said he's not worried about the fundamentals of his business, only about the crisis of confidence the markets are exhibiting towards his company. He said the long-term trends of more people on the planet and a growing middle class will keep Alcoa growing for decades to come.

Cramer agreed and continued his recommendation of this beaten down stock.

Fundamentals Intact

As earnings season rolls on, Cramer offered up a third "Executive Decision" segment where he spoke with Kevin Johnson, CEO of Juniper Networks ( JNPR), an Action Alerts PLUS stock that's down 24% since posting inline earnings with downside guidance. Juniper now trades are just 12 times earnings with a 16% growth rate.

Johnson said that Juniper has grown 15% year to date and as network traffic continues to grow, the company's fundamentals remain intact. He said in the networking industry, innovation matters, which is why the company's router business is up 19% and why Juniper continues to focus on high-end switches that differentiate its products and grow margins and marketshare.

Johnson also explained that as customers ask for new features, Juniper sometimes defers revenues until those features are delivered. When they are delivered, he said, that revenue is recognized as income. Johnson said that Juniper's book-to-bill ratios remain strong, as are new orders and bookings.

Finally, when asked about the company's use of cash, Johnson said that Juniper has strong cash flows, which allow it to fund operations, buy back stock and invest in growth opportunities as they arise.

Cramer said after taking such a beating, he feels that Juniper shares represent great value.

Lightning Round

Cramer was bullish on International Paper ( IP), ConocoPhillips ( COP), Total SA ( TOT), Chesapeake Energy ( CHK), Abbott Laboratories ( ABT) and Campus Crest Communities ( CCG).

He was bearish on Cree ( CREE) and ATP Oil & Gas ( ATPG).

Apple Pauses

In his "No Huddle Offense" segment, Cramer chimed in on what to do with shares of Apple ( AAPL), an Action Alerts PLUS stock that some thought would never miss their numbers.

Cramer said there's no denying that Apple missed their numbers, but the question now is when to jump back in. He said if investors divide Apple shares by10, then this $42 stock has pulled back to $40. That's not a lot, considering that shares were $35 just a few weeks ago.

Cramer said that Apple is now a "show-me" situation where investors must wait one quarter or be opportunistic about when they buy. He said unlike Intel ( INTC), which has accelerating growth, Apple has taken a pause.

--Written by Scott Rutt in Washington, D.C.

To contact the writer of this article, click here: Scott Rutt.

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At the time of publication, Cramer was long Coca-Cola, Alcoa, Juniper Networks and Apple.

Jim Cramer, host of the CNBC television program "Mad Money," is a Markets Commentator for TheStreet.com, Inc., and CNBC, and a director and co-founder of TheStreet.com. All opinions expressed by Mr. Cramer on "Mad Money" are his own and do not reflect the opinions of TheStreet.com or its affiliates, or CNBC, NBC UNIVERSAL or their parent company or affiliates. Mr. Cramer's opinions are based upon information he considers to be reliable, but neither TheStreet.com, nor CNBC, nor either of their affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Mr. Cramer's statements are based on his opinions at the time statements are made, and are subject to change without notice. No part of Mr. Cramer's compensation from CNBC or TheStreet.com is related to the specific opinions expressed by him on "Mad Money."

None of the information contained in "Mad Money" constitutes a recommendation by Mr. Cramer, TheStreet.com or CNBC that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. You must make your own independent decisions regarding any security, portfolio of securities, transaction, or investment strategy mentioned on the program. Mr. Cramer's past results are not necessarily indicative of future performance. Neither Mr. Cramer, nor TheStreet.com, nor CNBC guarantees any specific outcome or profit, and you should be aware of the real risk of loss in following any strategy or investments discussed on the program. The strategy or investments discussed may fluctuate in price or value and you may get back less than you invested. Before acting on any information contained in the program, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.

Some of the stocks mentioned by Mr. Cramer on "Mad Money" are held in Mr. Cramer's Action Alerts PLUS Portfolio. When that is the case, appropriate disclosure is made on the program and in the "Mad Money" recap available on TheStreet.com. The Action Alerts PLUS Portfolio contains all of Mr. Cramer's personal investments in publicly-traded equity securities only, and does not include any mutual fund holdings or other institutionally managed assets, private equity investments, or his holdings in TheStreet.com, Inc. Since March 2005, the Action Alerts PLUS Portfolio has been held by a Trust, the realized profits from which have been pledged to charity. Mr. Cramer retains full investment discretion with respect to all securities contained in the Trust. Mr. Cramer is subject to certain trading restrictions, and must hold all securities in the Action Alerts PLUS Portfolio for at least one month, and is not permitted to buy or sell any security he has spoken about on television or on his radio program for five days following the broadcast.

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