It's April -- Ready for Earnings Season?

The deluge of data is about the begin. Prepare yourself with TheStreet.com's earnings season essentials.
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In the spirit of Financial Literacy Month, the following are a few essential lessons on how to prepare for and make sense of the forthcoming deluge of corporate earnings data.

From Cramer's 'Mad Money' Recap: How to Play the Earnings Season:

"We can't be too optimistic about this earnings season," Jim Cramer cautioned viewers of his "Mad Money" TV show.

"The odds just simply don't favor investors during the few short weeks that most companies report their earnings," said Cramer.

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From Five Missteps to Avoid in Earnings Season:

#1: Relying Only on Headline Numbers

With a headline, suddenly the world knows that XYZ Corp. earned 42 cents... In after-hours markets, XYZ Corp. is getting whacked because the company was expected to earn 43 cents.

A few minutes pass, and more tidbits of information come across the screen, telling the world that "based on non-GAAP results, XYZ earned 44 cents." (In some circumstances, new data such as this does not appear in any headline, and you can only ascertain it from a buried spot in the press release or during the conference call.) Suddenly the geniuses that sold XYZ are buying it back (and then some).

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From Conference Calls: The Good, the Bad, the Misunderstood:

Bad: Merrill Lynch, Third Quarter of 2007

From the outset of the call, Stan O'Neal, Merrill's

(MER)

chief executive officer (at the time), took the microphone. (This was a departure from Merrill's normal procedure, which usually has its calls conducted by the company's chief financial officer.) Immediately, danger signs flashed that matters at Merrill were worse than imagined. O'Neal tried to use the forum atmosphere of the conference call as an opportunity to convey a mea culpa. However, what unfolded on the call was O'Neal's disclosure that Merrill had taken too much subprime risk and that its risk management systems failed.

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From Income Statement Insight: Gross Margins Matter:

Simply put, gross margins are the revenues a company has left over after the cost of production. A gross margin comes from a company's income statement -- it's the difference between revenues and cost of goods sold (COGS, also referred to as cost of revenue), which can be either a dollar number (gross profit) or a percentage. Gross margins are essentially a measure of profitability.

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From To Guide or Not to Guide: A Look at Earnings Guidance:

Critics may think that guidance has a pernicious influence on the public capital markets -- one that harms investors, doesn't help analysts, and pushes managers into self-defeating, myopic actions. The data tell us otherwise.

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From Talking to Management, Part 1: The Big Questions:

Has the company really created a "moat" that protects its profits from competition, or is it trying to fool me? I don't always get a sharp answer, but the exercise is always valuable. Uncertainty leads to doing nothing or to a smaller position, which is always appropriate when you don't have a big edge.

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To stay up to date on earnings news, check out TheStreet.com's Earnings section.

To listen to a company's upcoming (or previous) earnings conference call, bookmark and visit TheStreet.com's Conference Calls page.

This article was written by a staff member of TheStreet.com.