Mad Money

Like gravy, lumpy stocks just don’t appeal

As earnings season marches forward, Cramer will be watching closely for lumpy stocks.

By lumpy Cramer means companies that are showing inconsistencies.

"Companies that are struggling to make their quarter sometimes use the term 'lumpy' when describing their sales," Cramer explained. And lately the market has been very unforgiving when results are lumpy.

Although it's not clear that Apple actually said 'lumpy,' Cramer pointed to the tech titan as a textbook example.

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Though Apple beat Street expectations on revenue and EPS, shares tumbled on Tuesday after Apple reported lumpy iPhone sales.

The record 51 million iPhones sold by Apple in the quarter ending December 28 fell short of the 55 million expected by Wall Street.

That's lumpy and as a result the stock was sold, Cramer noted.

The "Mad Money" host believes the same phenomenon was also behind weakness in Seagate. "I found their high end drive business to be inconsistent," Cramer said. Shares traded more than 10% lower on Thursday."

Cramer added that lumpiness was also behind recent weakness in Alcoa, General Electric and IBM.

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Conversely Cramer said companies that are putting up sales numbers that have no lumps, or inconsistencies, are being rewarded by the Street. He points out that, "United Technologies and Honeywell stand out as companies with no lumpiness at all. Also, Procter & Gamble and Kimberly Clark saw no lumpiness."

Therefore, as earnings season marches on, Cramer thinks it's prudent to sift through results and look for lumps.

"If sales are described as "lumpy" on the conference call be prepared to take your lumps as a shareholder. That is, if management is showing inconsistent sales, then your stock will probably be going down."

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