Cramer's 'Mad Money' Recap: Price Matters More Than Earnings (Final)

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NEW YORK ( TheStreet) -- When it comes to investing, there are a lot of factors to pay attention to, Jim Cramer told his "Mad Money" TV show viewers Thursday. During earnings season, perhaps the most important factor is a stock's share price. Cramer said that too many investors have been asking whether this has been a good or bad earnings season so far. The question they should be asking is whether stock prices have run up too far, or not enough, ahead of those earnings.

Case in point, Yum Brands ( YUM), a company Cramer recently sold from charitable trust Action Alerts PLUS. Cramer said that Yum delivered on every metric that mattered this quarter, yet the stock got hammered anyway. Why? Perhaps it's because shares have run up 45% so far this year, said Cramer. At that level, it doesn't matter how rosy a picture management paints, profit-taking is in order.

The same applies to IBM ( IBM), another Action Alerts PLUS name. Cramer said he took some profits in this name too ahead of the quarter, but after reading the company's spectacular earnings, he felt that was a mistake. This was, of course, until he looked at the stock price, and saw that shares immediately took a hit on the news after running up ahead of the quarter.

Cramer fav, Cypress Semiconductor ( CY), is an example of the opposite case. This stock has been performing terribly, he noted, but when earnings turned out to be less-terrible, shares shot higher by 11.8%. Insurance giant Travelers ( TRV) was up in similar fashion, up 3.75%.

Price matters, Cramer reiterated. That's why shares of Peabody Energy ( BTU) can spike 6% on bad earnings and why Apple ( AAPL), another Action Alerts PLUS name, can rise and fall at the drop of a hat. In the case of Peabody, the bad earnings weren't as bad as expected; with shares down 60% over the past 12 months, a rally made perfect sense. For Apple, the stock is up 75% over the past 12 months, so of course some profit-taking will be in order.

Cramer said that earnings do matter, but if the share price isn't right for those earnings, the price will be adjusted accordingly.

Executive Decision

In the "Executive Decision" segment, Cramer sat down with Klaus Kleinfeld, chairman and CEO of Alcoa ( AA), to talk about the company's outlook as well as its many green initiatives to help the environment.

Kleinfeld mentioned the many different industries that are booming for Alcoa, starting with aerospace, where the company just raised its forecasts. He said that Boeing ( BA) now has an eight-year backlog and its newest 737 jet will be made of all aluminum, which affords it a stronger, lighter frame that's 50% more fuel efficient. Autos is another bright spot for Alcoa, where the company is helping carmakers achieve 20% better fuel economy by using lighter, aluminum frames and components.

Kleinfeld was also bullish on shaped cans, which are replacing plastic bottles for many soft drinks. He noted that aluminum is infinitely recyclable and that 75% of all the aluminum ever mined is still in use today, an amazing statistic. Kleinfeld dispelled the rumor that increased recycling hurts Alcoa's bottom line. "Alcoa loves recycling," Kleinfeld said, as the company has a huge recycling plant and recycling takes only 5% of the energy that mining does. Thus the company can sell recycled aluminum at far higher margins than new.

Other highlights included computers, where Kleinfeld said products can be made lighter, stronger and run cooler -- thanks to aluminum -- and turbines, which allow jets to run more efficiently with better emissions when made with the metal.

Kleinfeld closed by also dispelling the notion that China is flooding the market with aluminum. He said in fact, China produces and uses 40% of the world's aluminum. The problem, he noted, is that China's aluminum is the dirty kind, which uses a ton of water, energy and other resources to produce.

Cramer reiterated his bullish recommendation of Alcoa.

In the second "Executive Decision" segment, Cramer once again spoke with Chuck Bunch, chairman and CEO of PPG Industries ( PPG), a stock that just hit a fresh 52-week high.

Bunch said that he's bullish on the U.S. economy, noting that end markets including autos, aerospace and even construction are showing signs of strength. The low price of natural gas here in the U.S. has been a windfall, he said, for not only PPG but also for the chemical industry and the overall U.S. industrial sector.

Expanding on that notion, Bunch said that the U.S. is now very competitive with China when it comes to energy intensive businesses, now that natural gas here sells for just $1.90 vs. $6, more than three times that amount, in China. The price of natural gas combined with inflating wages in China means that the cost advantage China once had is rapidly diminishing, he said.

Bunch said the PPG will continue to invest capital into both the U.S. and China over the coming years and he expects that both markets will continue to do well. However, if the U.S. revamps its tax policy, Bunch added, the U.S. could pull into the lead.

Finally, when asked why PPG decided to exit the glass business and instead focus on coatings, Bunch said that glass became a commodity business, whereas coatings requires proprietary technology to meet customers' specific needs while at the same time being far less capital intensive to produce.

Cramer remained bullish on PPG Industries.

Mad Tweets: GNC vs. Vitamin Shoppe

In the "Mad Tweets" segment, Cramer responded to questions sent via Twitter to @JimCramer. When asked whether GNC ( GNC) or Vitamin Shoppe ( VSI) is the better play on nutritional supplements since both stocks are near their 52-week highs, Cramer dove right in.

GNC is the more established player, said Cramer, with 7,600 stores in all 50 states, plus some internationally. Vitamin Shoppe is smaller, with only 520 stores, all of which are company owned. This gives Vitamin Shoppe the edge when it comes to growth, since the company is operating from a smaller base.

But when it comes to other matrices, GNC takes the cake, said Cramer. For example, Vitamin Shoppe saw same-store sales increase 7.4% last year, GNC saw a 10.1% rise and gave upside guidance. Vitamin Shoppe's margins stand at just 9%, compared to 16% for GNC. Plus, GNC sports a stronger balance sheet and a small dividend to boot, noted Cramer.

Then there's the issue of execution. Cramer said that GNC seems to have a better understanding of what its customers want, catering more toward sports products that keep customers coming back regularly for more.

Finally, when looking at these companies' valuations, GNC trades at just 16 times earnings with a 24% growth rate, compared to 21 times earnings at Vitamin Shoppe with a 21% growth rate. That's why when it comes to the vitamin market, GNC is both the better company and the better stock, Cramer concluded.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer told viewers to stick with the "big data" theme after companies like F-5 Networks ( FFIV) and VMWare ( VMW) both posted great earnings. He said the big-data trend is a fabulous secular growth story that's strong enough to trump the Spanish bond auctions and even the latest unemployment data of the day.

Cramer said that Salesforce.com ( CRM) and Red Hat ( RHT) both remain strong players in the big-data and cloud-computing space, but so are companies like EMC ( EMC), the Action Alerts PLUS holding that owns most of VMWare, and of course, Intel ( INTC), which makes the chips that power most data center servers.

"That's how you make real money," Cramer concluded.

Lightning Round

In the Lightning Round, Cramer was bullish on Devon Energy ( DVN), Becton Dickinson ( BDX), Baxter International ( BAX), Kinder Morgan Energy Partners ( KMP) and Energy Transfer Partners ( ETP).

Cramer was bearish on Breitburn Energy Partners ( BBEP), Micron Technology ( MU) and Chesapeake Midstream Partners ( CHKM).

--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's Action Alerts PLUS was long AAPL, IBM and EMC.

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."

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