Memo to CEOs everywhere. Here's how to handle your quarterly earnings report.
Don't B.S. us. Don't tell us that a quarter is a blowout if it is an in-line quarter. Don't tell us that you blew away the bottom line if the top line was unimpressive. Don't try to highlight something that is good but unimportant to mask something bad that IS important.
Level with us. If the projections you made at the beginning of the year aren't panning out, give us a heads up now. Take hope out of the equation. Don't bet on good luck. Face the music. If it hurts the stock so be it. Tell us the truth now. If you think you are going to miss, or if your CFO thinks he is going to miss, take the revenue down on the quarterly conference call, don't selectively leak it to one or two analysts.
If you think the stock is cheap, don't tell us. Show us. Buy some stock. I have been in many a situation where management knew it was expensive but told us it was cheap. If you buy stock -- and don't give us any of that options gibberish -- if you buy stock, you are buying it for only one reason: because you think it will go up.
Tell us what the risks are. Don't just tell us the great high points. Tell us what could go wrong.
got its credibility by telling us about the problems ahead and then when it addressed them we grew in admiration for the management team.
Don't promise any deals you can't be sure to deliver. If you were unable to complete something in time for the quarter, too bad, you didn't do it. Don't tell us that something is about to get done. Get it done.
Don't overpromise and then underdeliver. We will kill your stock. Don't go on TV unless you have something good to say. If you did the numbers, or a little more than the numbers, take a pass. You have nothing to be so proud of that you should be out there high-fiving with
Be sure you are ready with all of the answers, particularly those about the obvious misses. If you have a division that didn't hit the numbers, don't sugarcoat it by talking about the division that did. We see right through that. What are your key metrics? How did you stand with them? What did you do wrong that made it so you didn't hit all the necessary metrics?
Above all, never fudge or prevaricate. Tell it like it is. Your credibility with the Street is defined by these moments. Credibility is what you carry with you at this job, the next job and the job after that. Don't spoil it if you didn't deliver on what you promise. Just be candid and explain why it happened the way it did. We will forgive you for missing a number. We will never forgive you for trying to con us. And believe me. We will know it. And we will cream your stock anyway. 'Cause that's what we do.
: At one point today I hopped off a
quarterly conference call to take a call from my wife. We spoke about some things she wanted me to pick up and then I hopped back on. The call seemed to have a taken a turn for the worse, with a little more contentious Q&A than I had expected, given the stellar revenue growth and the terrific gross margins. I was almost ready to bang some out.
Then I realized I was listening to the wrong conference call. I had picked up on a large food company's Q, not that of Colgate.
It's earnings season. These things happen. There are dozens of calls every hour. We try to listen to as many as we can. We always listen to those of positions we have. But we also try to listen to those that could cause collateral damage to our existing positions. And if we have a free moment, we hop on a call, with the hopes of getting some insight into the situations that could turn out to be interesting to us.
What most companies don't understand is how taxing and difficult this period is. Everybody is reporting all at once and everybody has a different story to tell.
But if you intend to trade, you have to be on these calls. If you try to do it without it, and just deal with the posted numbers, I promise you that you will be smoked many times. Sure, a time or two you will do fine. But then that big hard-to-understand number will hit and you will be trading blind.
And I will steal your lunch money.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Cisco and Colgate-Palmolive. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at