My 'Secret Sauce' for Earnings Analysis

At the start of the month, we examined the first installment of our earnings report card for large-cap companies, looking at how the earnings reports so far were coming in -- who was beating, who was whiffing and why. An earnings surprise performance can be highly indicative of how a stock will perform in subsequent weeks, so this exercise is an important way of gauging market sentiment, the direction of earnings, and simply who is hot and who is not going into the new year.

We are approaching the end of fourth-quarter earnings seasons, for the large-caps, anyway, with 87% of the S&P 500 reporting. (Note that many small-caps will be reporting through March, so we will wrap up the Russell 2000 report card in a week or two. Also, some of the large-caps have fiscal years shifted by one month, so they have not yet reported the quarter that ended Jan. 31.) As I look at the results, my "secret sauce" is to compare actual earnings per share not to the consensus at the report date, but to the consensus six to eight weeks earlier. This enables us to filter out the noise of last-minute adjustments to expectations. A company that beats by a couple of pennies after lowering guidance meaningfully from earlier in the quarter cannot be credited with a beat, sorry....235 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

Read the full story and get access to the Real Money Pro trading floor.

There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.

Already a Subscriber? Please login.

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.