Bottom line is, when a company blames a "tough environment" for its weakness, it's probably just making excuses.
"Don't believe the hype," was Cramer's fourth rule for investors. He said that not all upside surprises are worth getting excited about.
Cramer explained that any time a company manages to deliver earnings that are more than Wall Street was forecasting, the headlines immediately describe that as an "earnings surprise." But how that company generated that surprise is really what matters, he said, and is often the confusing part for individual investors.
Cramer explained that there are high-quality earnings surprises and low-quality surprises. High-quality earnings beats are organic, while low-quality beats are manufactured.In a high-quality earnings beat, a company delivers better-than-expected sales, which in turn leads to better-than-expected earnings. That usually means that business is improving or the company is taking market share. In other words, the company is growing, and Wall Street values stocks based on growth. In a low-quality earnings beat, however, only the bottom line improves, and that is usually brought about by cost-cutting or favorable tax rates or because the company is aggressively buying back its own stock to boost earnings per share. Cramer said there are a lot of companies that employ these tactics, but in the end there is no growth. Cramer told investors to always do their homework and not to get confused by the headlines. He said the earnings per share number is not the only number that matters -- a company's ability to deliver better-than-expected sales counts for a whole lot more.