Cramer's 'Mad Money' Recap: Running the Gauntlet

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NEW YORK ( TheStreet) -- The markets are asking a lot from companies this earnings season, sometimes too much, Jim Cramer told "Mad Money" viewers Thursday. That's why so few companies are able to run through the gauntlet and emerge unscathed.

Companies need to pass a number of hurdles if they want to see their stocks head higher. The first is Europe. If a company has any exposure to Europe or is seeing any weakness or is seeing its outlook diminished by the troubled continent, then its stock will be crushed, he said. In fact, this hurdle is the one responsible for much of the damage the markets have been seeing.

Then there's the U.S. election and looming fiscal cliff hurdle, explained Cramer. Even the upside surprise from Boeing ( BA) was not enough to keep its stock higher, as worries over defense spending brought in the profit-takers.

If companies can navigate those two hurdles, they must still make it past the China hurdle, said Cramer. That hurdle has been taking down the stocks of the industrials, the materials and stocks such as Cummins ( CMI) that need a strong China to grow.

But even if a company survives, it must still meet the deadliest of hurdles: expectations. Cramer said the stellar beat and raise from Tractor Supply ( TSCO) wasn't enough to save its stock, as expectations were for an even bigger beat with a bigger raise. The same was true with Sherwin-Williams ( SHW) -- its earnings weren't enough to keep its stock up 60% for the year, which is why it fell by 7% today.

Even the mighty Amazon.com ( AMZN) and Apple ( AAPL), a stock Cramer owns for his charitable trust, Action Alerts PLUS, were not immune to the expectations game, said Cramer. Apple is down 10% from its highs, but is still up 50% for the year -- which means its earnings needed to be a lot better.

"No one makes it out unscathed," Cramer concluded, which is why this will continue to be the most difficult earnings season in years.

Executive Decision

In the "Executive Decision" segment, Cramer sat down with John Faraci, chairman and CEO of International Paper ( IP), a company that took control of its own destiny by acquiring Temple-Inland, making International Paper more profitable and less cyclical.

Faraci said his company expected the Temple-Inland merger to take a full two years, but it has largely been completed in just nine months. He said next year will be about optimizing that acquisition, not about integrating it. International Paper expects to see far more than the $350 million in cost savings it initially projected.

Faraci also noted that International Paper is still seeing strong cash flows, which means it will likely continue to raise its dividend. That cash flow is being helped by the company's first price increase in over two and a half years, which gives a boost to its gross margins.

When asked about China, an important market for the company, Faraci said the China business is split almost in half between packaging for products that stay in China and those that get exported. The exported products are down 15% to 20%, he said, but internally they're strong, resulting in a 2% to 3% increase overall.

Turning to its U.S. business, Faraci confirmed that International Paper is benefiting from a transition from customers buying locally to buying online. He said his company's corrugated packaging business will be stronger this holiday season than it was last year. With input costs falling, Faraci said there will be lots of room for margin expansion in 2013.

Cramer continued his recommendation of International Paper.

Reinventing Itself

In his second "Executive Decision" segment, Cramer sat down with Chris Viehbacher, CEO of Sanofi ( SNY), another company that's taking control of its own destiny by reinventing itself outside of traditional patented drugs. Sanofi has delivered a 39% return, including dividends, since Cramer got behind the company in September 2011.

Viehbacher explained that Sanofi decided a few years ago that it wanted to get off the "patent treadmill" where the company needed to constantly invent drugs to replace older ones losing patent protection. In fact, nearly 25% of Sanofi's sales came off patent between 2008 and 2012. That's why the company expanded into areas where there were still high barriers of entry but did not necessarily require patents.

One of the company's moves was into areas where its competition wasn't: areas like Africa, Southeast Asia and Colombia in Central America. Sanofi also expanded into animal health, both for pets and animals used for food production. Both of those businesses are constant performers, noted Viehbacher.

Another area of interest was in treating the nearly 7,000 rare diseases that afflict humans. Medical science currently only treats 300 of them, said Viehbacher, leaving many so-called "orphan drugs" to be developed. One of those drugs is Kynamro, being developed in conjunction with Isis Pharmaceuticals ( ISIS), which came under fire for safety concerns. Viehbacher called Isis a terrific partner and said Kynamro provides a significant benefit to patients but will need to be monitored further.

Finally, when asked about the rampant diabetes epidemic that affects 350 million people around the globe, Viehbacher said that while people will spend $100,000 to treat this life-long disease, they haven't spent $1 working to prevent it, something that he hopes one day to change.

Cramer said Sanofi is one stock that's not done going higher.

Lightning Round

In the Lightning Round, Cramer was bullish on Nike ( NKE), LinnCo ( LNCO), CenturyLink ( CTL), Verizon ( VZ), Forest Laboratories ( FRX) and Royal Caribbean Cruises ( RCL).

Cramer was bearish on Under Armour ( UA), AT&T ( T), BP Prudhoe Bay Royalty Trust ( BPT) and Windstream ( WIN).

On the Right Side of Expectations

For his final "Executive Decision" segment, Cramer spoke with Abhi Talwalkar, president and CEO of LSI Corp ( LSI), a company on the right side of the expectations game. Its shares rose 7% Thursday after the company reported in-line results.

Talwalkar said investors were fearing the worst from LSI, but the company is further along in its transition away from PCs and into cloud and data center infrastructure. He said LSI owns the base station, which is where all mobile devices must first connect to for their data. LSI has proprietary technology that helps network data get to where it needs to go.

Talwalkar said that while all of technology spending is constrained at the moment, there is still a lot of great new technology being developed, which will eventually lead to a strong tech cycle going forward. He said data are being generated no matter what the economy, which is why LSI's products will always be in demand.

LSI currently has no debt and a strong balance sheet, noted Cramer, so could a dividend be in the company's future? Talwalkar said that's more a question of when and not if, but for the time being the company is focused on a $500 million stock buyback program as a way to reward shareholders.

Cramer said he finds this $6 stock intriguing and would consider starting a position at these levels.

No Huddle Offense

In his "No Huddle Offense" segment, Cramer sounded off on the latest lawsuit levied against Bank of America ( BAC) regarding bad mortgages during the financial crisis. He said the suit is just another example of the government's failure in dealing with the crisis. He said it's too little too late and won't matter one bit.

Cramer said this suit, like all the others, goes after the company, not anyone personally, meaning that it's the Bank of America shareholders who will ultimately pay. There will be no shutdown of the bank -- that would cost too many jobs -- and the suit is just another excuse for banks not to lend more money.

"Why bother at all?" asked Cramer. Changes in the banking system as a whole and Bank of America's top brass in particular were made years ago.

To watch replays of Cramer's video segments, visit the Mad Money page on CNBC.

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

To email Scott about this article, click here: Scott Rutt

Follow Scott on Twitter @ScottRutt or get updates on Facebook, ScottRuttDC

At the time of publication, Cramer's Action Alerts PLUS had a position in AAPL.

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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