NEW YORK ( RealMoney) -- There's something very humdrum about the predictability and reaction to earnings this time around. But we will still attempt to shoehorn everything through the eyes of the stocks, not the companies.
Here are some time-honored patterns:
McDonald's (MCD) is a serial runner-upper ahead of earnings, and then when it reports, it reports with pizzazz and style, beating even the toughest numbers, and then it sells off, so we have to search for the disappointment. Believe me, there isn't one, and that is why each faux disappointment has been an opportunity to buy on the second day when the profit-takers have vanished.Verizon (VZ) always seems to disappoint on the bottom and top lines, usually a function of not yet making enough money on the phones it subsidizes. At the same time, we see someone unhappy with the wireline business each quarter. First, wireline should have vanished by now. The fact that it remains a business, let alone a good one, is always shocking to me. Verizon is a buy because of the yield and because it has the capital to boost that dividend. Kimberly-Clark (KMB) is almost always horrible, so the stock gets hammered, but not because it reports a terrible number and a guide-down. That has been the experience for ages. It goes down because it has always run up, with buyers thinking, "This is the breakout quarter." Wait a couple of days and you will then hear the "breakout brigade" once again saying the next quarter is the earnings beat. In the meantime, the company will boost the best dividend in the soft goods sector, and it will settle in as a buy not long from now. Johnson & Johnson (JNJ) often goes down ahead of the quarter as people expect this stock to let people down, in part because lawsuits and recalls now seem to be quarterly expense lines. Then people say, aha, the earnings aren't that bad, the lawsuits and recalls have to be almost done, and the pipe is OK. So they buy it. Travelers (TRV) gets hit because it misses the number, as it is having a hard time investing for a good return. Travelers is a great company that's very conservative and didn't blow itself up with bad investments in an attempt to boost returns. But what matter here are premiums. They are going higher. So tomorrow it stabilizes and starts going higher along with the premiums, the only metric that really matters. And that's the rhythm of earnings pretty much every quarter. Familiar patterns that still elude people almost every time. You'd think they would have it down pat by now. But no one ever seems to. I left the hedge fund in part because this stuff became mentally unchallenging, even as it was hugely lucrative. I hope it's lucrative now for you. At the time of publication, Cramer had no positions in stocks mentioned.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV