Cramer's 'Mad Money' Recap: The Better-Than-Expected Game (Final)

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NEW YORK (TheStreet) -- "Don't be fooled by the 'better-than-expected' game," Jim Cramer told the viewers of his "Mad Money" TV show Friday.

He said when it comes to judging a company's earnings report, the game is much more complex than most people realize.

Cramer said there are six key companies reporting their earnings next week. They include Target (TGT Quote), Gap Stores (GPS Quote) and TJX Stores (TJX Quote) in retail, and Salesforce.com (CRM Quote), NetApp (NTAP Quote) and most notably, Dell (DELL Quote), in technology.

Cramer said there's an art, and a science, to determine whether any of these companies will deliver a true "better-than-expected" quarter, and whether the stocks will rocket higher, or get crushed, after they release their reports.

Cramer said most investors just look at the consensus estimates, which amounts to the average earnings expected from all of the analysts that cover a company.

But he said the consensus estimates are only part of the story. There's also a "high man," the analyst with the highest projected earnings. If a company fails to beat the high man's number, a stock could still get crushed, even if it beats the consensus.

To make matters worse, Cramer said there's also a "whisper" number, which is sometimes a number that's even higher than the high man. Cramer said in order for a company to truly deliver a "better-than-expected" quarter, it must blow through all of these estimates, forcing the company, and the high man, to raise their estimates.

If the key companies reporting next week fail to beat all of these numbers, the companies, and their respective sectors, could head lower.

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