Cramer: 6 Things to Look for in Next Week's Earnings
Mosaic. Yum! Brands. Costco. Pepsico.
With a number of companies scheduled to report quarterly earnings results next week, Cramer on Friday's "Mad Money" discussed six things he's hoping to hear:
First, Cramer wants to know how much a company made in the US versus overseas. Some investors tend to avoid companies in sectors they believe to be doing poorly because they're "using an American prism," Cramer said. Caterpillar , for example, has lead the Dow Jones Industrial Average this year, even though residential, commercial and infrastructure spending is slow in the US.
Second, while most companies report on top-line and bottom-line growth, Cramer would prefer they discuss the dividend. How the company made its money isn't nearly as important as whether it will pass some onto its shareholders, he argued.
Third, companies need to discuss market share. He wants to know if Under Armour , for example, is losing share in shoes to Nike. In a slow to no-growth era, Cramer said he'll "pay up" for companies that out-execute and take share from the competition.
Fourth, Cramer will be listening for the financial institutions that blame the government or regulation for earnings misses. He will pay less attention to those organizations and more to those who are expanding margins and making more money.
Fifth, Cramer is interested to know how commodity pressure in raw goods is affecting businesses. He wants to know how apparel makers are handling record cotton prices, for example, or what impact higher corn prices are having.
"The companies that can handle commodity inflation without skipping a beat are going to get a much higher price-to-earnings multiple than the ones that aren't," Cramer said.
Sixth, Cramer wants to hear forecasts for 2011. Companies who can provide that information on the call will make him feel confident that they're in control and will likely have higher multiples. He'll pay less for companies that can't provide a forecast.
As always, Cramer doesn't recommend buying ahead of earnings. He thinks it's important to listen to the whole conference call and then read the transcript before taking any action on a stock.
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