Cramer's 'Mad Money' Recap: Best Use of Earnings News (Final)
When it comes to gross margins, Cramer concluded, Wall Street wants consistency. Changes in gross margins often lead to changes in stock price.
Listening to ManagementCramer's next things to look for on conference calls and earnings reports are signals about the future, mainly talk of dividend boosts or catalysts to boost sales.
Far too often, companies are enamored by stock buyback programs as a way to return value to shareholders, Cramer told viewers, but far too often, buybacks do nothing to raise share prices and only work to help management beat estimates. That's why he vastly prefers dividends as a way to reward a company's shareholders.
With interest rates at historic lows for the foreseeable future, Cramer said dividends have taken on increased importance. That's why nearly 40% of the total return of the S&P 500 over the past 10 years has been dividends, and why Cramer has preached almost nightly on how reinvesting dividends can significantly boost a portfolio.
Cramer said he's always listening for management to talk about their dividends and the possibility of raising them in the future. In addition, he's also listening for what he calls catalysts, something that could boost a company's share price in the short term.
Catalysts come in all forms, said Cramer. For pharmaceutical companies, a catalyst may be a drug that's entering stage III testing or expanded uses for existing drugs they're already producing. In the tech sector, catalysts are often new products or technologies that should seriously boost business. While for pipeline companies, catalysts can be expansions of their network into new, lucrative areas.
But no matter what form they appear, Cramer said talk about future catalysts or dividend boosts will always give investors reasons to buy when the market dips.
Geopolitical RisksCramer's final factors to consider on an earnings report or conference call included geopolitical risk and a stock's chart.
Geopolitical risk isn't just about unrest in the Middle East, explained Cramer. There are now dozens of factors that can affect a company's earnings. In 2011, for example, the financial crisis in Europe held bank stocks across the globe hostage for months on end, he explained. And a slowdown in the Chinese economy affects the earnings of countless companies, from industrial equipment makers to mining and materials to even retailers like Coach (COH) and Yum Brands (YUM) .