You have to understand what earnings are, Jim Cramer told his
"RealMoney" radio show listeners Thursday.
Ask yourself how much money you have after you factor in taxes and expenses, and that's your bottom line, he said. That amount could also be called your earnings; it's no different for a company.
Every publicly traded company, meaning one that sells stock, must report quarterly earnings, he said. They can pick what date they report, but they have to report every three months.
Not only do companies say how much they earned per share, they say how much their earnings have grown compared with the same period a year ago. Double-digit earnings, meaning 10% or more, are great, he said. And any growth over 20% is an "A+," he added.
He walked listeners through a couple of key earnings reports, noting that over 200 companies reported on Thursday, making it a day to really "take the temperature of the U.S. economy."
Among the bank stocks that reported, he pointed out that
reported 14% earnings growth, while
reported 4% growth.
Mortgage rates are up huge, but Wells Fargo said that consumer lending is still good.
Citigroup said that consumer lending is bad in this country, and that it's earnings growth was a result of investment banking business and foreign banking.
So, which bank should we believe about the state of the economy? Cramer said to believe the bank that delivered, Wells Fargo. The bank is doing something right when it comes to consumers. He also said that he would sell Citigroup because of its quarter.
came out with, frankly, a not great report," he said. Yet the stock jumped 9%. Cramer owns Yahoo! for his
ActionAlerts PLUS charitable trust portfolio.
looked like it had a decent quarter, but the stock did nothing.
Why? Cramer said it's because people thought Yahoo!'s quarter would be bad. So, when it turned out to be OK, people were pleasantly surprised and wanted to buy it.
However, Wall Street had expected a mediocre quarter from Intel, and that's what the company delivered. So, the stock didn't move on the earnings report, he said.
Cramer defined a blowout quarter as one when a company's results are dramatically better than what investors were looking for.
Three companies that just reported blowout quarters include software maker
, aerospace and defense play
and coal producer
They said a few months ago that business would be good, and the shares are soaring on the great results, he said. And he believes that
will have a blowout quarter when it reports next week.
The company makes the inner components for cable set-top boxes, and he said that its market is booming. He said that he would want to be in this $3.75 stock ahead of the report.
Cramer on Demand
Each week Cramer discusses the stock that his listeners tell him they want to hear about. Thursday's "Cramer on Demand" company was
National Oilwell Varco
, which he said is one of his favorites. (Weigh in on what stock Cramer should discuss next week by taking our poll at the end of this story.)
"Right now, there is a worldwide oil rig shortage," he said. There's oil, but there aren't enough rigs to get to it.
National Oilwell Varco is the only company left that makes rigs because its rivals folded when oil prices were cheap. And this monopoly means that it is the company to call in the rush to find more oil.
The stock is off 10% from its high, which he said could be a good level at which to get into the stock.
A caller wanted to know Cramer's take on
, a stock that he owns for
Cramer said to "get on board," because the company just reported great numbers and has solid management. The company makes a rheumatoid arthritis treatment, an "interesting cholesterol drug" and Claritin.
He had been looking for 15 cents a share, and the company reported 24 cents a share. "This is the quarter to load the boat up," he said.
He said that "
quarter was frankly not great." The company relied on tobacco price increases to boost earnings, rather than on strong demand. And he pointed out that you can't raise prices everyday.
However, he said that he wouldn't sell the stock, which he owns for his charitable trust because it has more than earnings going for it right now.
The company is much more than a tobacco company, thanks to its
unit. And he said that Altria will split into three companies once its tobacco litigation is in the past. These companies will be a domestic tobacco company, an international tobacco company and a food company.
When the split happens, he believes the stock will go from $69 to $100, and in the meantime Altria pays investors a good dividend while they wait for the breakup.
He cautioned a caller not to buy
before it reports earnings later Thursday.
The stock is ticking higher now, but he doesn't believe the company will wow Wall Street enough for the stock to jump after the numbers come out.
He believes that the company's biggest competitor, Conexant, will jump because it will blow out the numbers. But he said that Broadcom's earnings will be in line with expectations.
"I think the stock may have the same reaction that
had when it reported," he said. Qualcomm was up ahead of its earnings report, but didn't have anything spectacular to say when the number came out. Now, it's down a bit.
No doubt Broadcom is a great company, he said, adding that if he already owned it he would not sell. "But I wouldn't get my hopes up ... I had my hopes up for Qualcomm that it would dazzle, but it didn't," he said. Cramer owns Qualcomm for ActionAlerts Plus.
A caller wanted to know more about
Fording Canadian Coal Trust
, a stock that Cramer used to own for his charitable trust.
Cramer said that he bought it because he likes the coal sector and was attracted to the 12% dividend. But the company said in the past that it could dig up more coal than it really was able to.
He said that on the production front, the stock is a "serial disappointer," and that he prefers Peabody Energy.
Gold is down $15 and some are saying that the precious metal's run is over. But with a run on gold in India, China and Iran hoarding gold and the fact that miners can't find enough, Cramer said that the gold boom is far from over.
This is a buying opportunity, he said. When a store has big sale, you don't freak out and say you won't touch the merchandise, said Cramer. And the story is the same for the day's decline in gold prices.
He said that
is his favorite gold mining play because it has the lowest finding costs. For a speculative play, he likes
A caller said that he had bought
in increments as the stock edged lower because Cramer likes the company. But he wanted to know when to stop buying on the dip, and whether Sealy will ever go higher.
Cramer said that the company pays a good dividend to patient investors, and that it only recently became a publicly traded company. He added that it will trade erratically for little while longer, but that he believes it will be a good stock over the course of the next two years.
He also said that
Brocade Communications Systems
should be bought.
The company makes gear for information storage and retrieval, and he believes that it will see a blowout quarter.
At the time of publication, Cramer was long Altria, Qualcomm, Schering-Plough and Yahoo!.
James J. Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. Outside contributing columnists for TheStreet.com and RealMoney.com, including Cramer, may, from time to time, write about stocks in which they have a position. In such cases, appropriate disclosure is made. To see his personal portfolio and find out what trades Cramer will make before he makes them, sign up for
Action Alerts PLUS. While he cannot provide personalized investment advice or recommendations, he invites you to send comments on his column by
clicking here. Listen to Cramer's RealMoney Radio show on your computer; just click
here. Watch Cramer on "Mad Money" at 6 p.m. ET weeknights on CNBC. Click
here to order Cramer's latest book, "Real Money: Sane Investing in an Insane World," click
here to get his second book, "You Got Screwed!" and click
here to order Cramer's autobiography, "Confessions of a Street Addict."