Cramer's Mad Money - Perrigo Is Drinking Johnson & Johnson's Milkshake (2/1/11)

by: Miriam Metzinger

Stocks discussed on the in-depth session of Jim Cramer's Mad Money TV Program, Tuesday February 1.

CEO Interview: Joseph Papa, Perrigo (NASDAQ:PRGO), Johnson & Johnson (NYSE:JNJ)

Cramer told viewers last week to keep an eye on Perrigo (PRGO), the "king of knock-off over the counter drugs" and the main beneficiary of Johnson & Johnson's (JNJ) many recalls. The company has as much as a 70% market share in key generic products and soundly beat earnings estimates by 10 cents with a 24% rise in revenues and raised guidance. "Perrigo is drinking JNJ's milkshake," said Cramer, especially since knock-off brands carry much higher margins and Perrigo's stock soars when it announces a new acquisition. The stock is up 30% since Cramer got behind it last May, but he thinks it has more upside.

Joe Papa said the company is in a "win, win, win" situation with quality and savings for the customer, higher margins for the retailer and a great return on investment for shareholders. When asked if Perrigo will be hurt by an economic recovery, Papa said that 91% of customers who switch to store brands do not go back. With the highly successful drug Allegra coming off patent, Perrigo has a tremendous opportunity and is releasing its own version of the drug in the spring, just in time for allergy season.

The infant formula acquisition has been quite successful, especially since Perrigo can sell the product 50% cheaper than the main brand. While Perrigo has had some recalls of its own, there was only one issue, and it was not severe enough to close down a plant. Papa said gross margins should rise as the issue is resolved. He looks forward to seeing profits from the unseasonably cold weather next quarter, since 10% of the company's products are cough and cold treatments. "Value is always in season," said Cramer.

Interview with Tudor Brown, President Arm Holdings (NASDAQ:ARMH), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC)

The mobile internet tsunami is alive and well with fabulous earnings from Arm Holdings (ARMH). The stock soared 8% on Tuesday, adding to its successful 259% rise in share price since Cramer got behind it in 2009. The company licenses chips and energy efficient processors to virtually every major smartphone and gadget company, and its designs form an integral part of the iPad and the iPhone. In spite of its success, there is a remarkable lack of bullishness among analysts, with few having a "buy" rating on the stock. The main issue is the perception that stock is overvalued, but with 100 billion ARMH microprocessors expected by 2020, the company has only just begun its upward move.

Cramer called Arm Holdings "the new Intel (INTC)" with devices that save space and power. The fact that both Apple (AAPL) and Microsoft (MSFT) use Arm Holdings' technology shows the company's long reach in tech. Cramer thinks ARMH is quite simply one of the best stocks out there.

CEO Interview: John Sherman, Inergy (NRGY)

The unseasonably cold weather must be making money for some companies. The propane gas companies like Inergy (NRGY) are already counting the profits for next quarter with the latest cold snap. Cramer has long been a fan of Inergy, since it is an MLP that shares most of its profits with shareholders and is a virtual "cash machine." The stock yields 6.8% and has a growing natural gas storage operation in addition to its propane gas business, which is like an unregulated utility, as the company buys propane wholesale and sells it retail.

Inergy reported a very solid quarter with an 18.8% rise in revenues. The company is up 32% since Cramer recommended it in 2009 and 6% since the CEO appeared on Mad Money in November. When asked about raising the dividend, John Sherman said the first objective is to protect the dividend, which is essential since the company recently made an acquisition, but the company will continue its tradition of raising its yield. When Cramer asked if the natural gas storage business could be spun off into a separate business, Sherman responded that the propane segment is the mature cash cow and will grow through consolidation but there is a tremendous upside in natural gas storage. Sherman added that natural gas is an undervalued fuel and Inergy provides an essential service in providing infrastructure for the transport of natural gas. Cramer sees outstanding upside potential in store for Inergy; "You haven't missed anything."


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