JIM CRAMER INVESTING GUIDES | VOL.

03 | 2023

HOW INVESTORS CAN

GET AHEAD BY LISTENING
TO EARNINGS CALLS

A company’s quarterly post-earnings The investor relations page is a key resource

conference call can often provide investors that includes recent press releases, quarterly
with a treasure-trove of information not reports and a calendar of events past and
found in the official results — and it’s an future. Preview research notes from bank
essential homework item for any investor analysts are also a useful jumping-off point.
in individual stocks. Analysts often use their research reports to
highlight the most popular questions they’ve
A company’s management team uses the received from investors.
call — a link is generally provided on the
earnings release or available on the investor
relations page of a company’s website — to
provide more color and detail around the
reported results, particularly with the regards
to the firm’s outlook. The team then fields
specific questions from analysts and reporters
that can further elucidate the headline
figures. But it’s crucial for individual investors
to filter out any PR fluff and actively listen
for comments relevant to the firm’s stock.

PREPARING FOR THE CALL
Preparation for an earnings call can start
days before a company publishes its financial
results. For starters, it helps to know how
the management team in question structures
its calls by reviewing those of prior quarters.
After researching how a call will be structured,
investors should review topics that will likely
be discussed, as well as formulate some
questions they hope to have answered.
Once the call kicks off, investors should take
detailed notes, including the time stamp
of comments, in order to reference the
full transcript more easily once it’s made
available. Oftentimes, these calls can be
filled with fluff and self-congratulations —
sometimes well-deserved, other times less
so. But the key is to listen for information
that could ultimately impact a bank’s
financial model and, therefore, earnings
projections.

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JIM CRAMER INVESTING GUIDES | VOL. 03 | 2023
An earnings call essentially covers three time
periods: The three months reflected in the
reported results; the period between the final
day of the quarter and the date the results
were reported; and the future period from
the time call wraps through the final day of
the current quarter and/or fiscal year.
COMMENTARY ON THE RESULTS
Almost all calls begin with a discussion of
the reported results. These are some key
themes to listen out for:
1 | SALES DYNAMICS/MIX
This highlights the current appetite of
customers, while also providing insight into
profit margins. Did the company have
to offer discounts? Are consumers more
interested in higher or lower-margin products?
During Club holding Procter & Gamble’s
(PG) fiscal third-quarter results, the
management team discussed the impact
the sales mix had on sales, gross margins
and overall profitability during the reported
period. “On the gross margin and sales
connection here from a mix perspective,
the effect that you’re seeing here is product
mix. So, consumers when they come into
our P&G portfolio, tend to trade up into
higher-value items...that’s a positive impact
from a mix perspective on the top line,”
management noted. The team then added:
“Those higher unit sales items also have
higher unit profit, but the gross margin in
percentage is slightly lower for some
of them.”
HOW INVESTORS CAN GET AHEAD BY LISTENING
TO EARNINGS CALLS
2 | INDUSTRY METRICS AND KEY
PERFORMANCE INDICATORS (KPIs)
Different industries have their own important
and unique measurements that provide
insight into key drivers of financial performance.
For example, same-store sales in retail is
going to translate into sales performance;
the medical ratio in healthcare or the
overhead ratio at a bank both speak to how
efficiently the businesses are being operated;
realized prices in the energy space tell
us if management is hedging appropriately;
depletions in the alcohol industry tell us
if product is moving off retail shelves; and
data on active users provide insight into
the health of social media platforms and
technology companies. Importantly, these
metrics also provide for an apples-to-apples
way of measuring different businesses in
the same industry.
During Club holding TJX Companies’ (TJX)
last earnings call, management discussed
same-store sales, also known as “comps.”
The team said: “Our overall comp store
sales increased 3% at the high end of our
plan. This comp sales increase was driven
by customer traffic...our overall apparel
business, including accessories, continued
its momentum with comp growth up [by]
mid-single digits.”
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JIM CRAMER INVESTING GUIDES | VOL. 03 | 2023
3 | SUPPLY CHAIN, CUSTOMER/END-
MARKET DEMAND, AND INVENTORY
As we saw during the Covid-19 pandemic,
companies struggled with supply-chain
disruptions. But as the global economy
reopened, demand surged faster than supply-
chain issues could be resolved, contributing
to a multi-decade high bout of inflation.
Then, when supply chains started to improve,
inflation had already begun to dampen
demand for goods and companies. That
left many companies, particularly those in
the consumer-electronics space, with an
inventory glut. The situation showed that
supply chain efficiency — an ability to gauge
demand and hold the right inventory in the
right quantity — is key to operating efficiently
and maximizing financial performance.
Any commentary that provides insight into
this flow of goods can be indicative of
not only the performance in the reported
quarter but the near-term outlook, as well.
In its most recently reported quarter, Club
holding Advanced Micro Devices’ (AMD)
management team spent a good deal of
time discussing its efforts to flush out excess
inventory: “Revenue declined 65% year-
over-year, to $739 million, as we shipped
significantly below consumption to reduce
downstream inventory...we believe the
first quarter was a bottom for our Client
processor business.” Management added:
“And certainly, our goal has been to normalize
the inventory in the supply chain so that
shipments would be closer to consumption.
We expect that will happen in the second
half of the year.”
HOW INVESTORS CAN GET AHEAD BY LISTENING
TO EARNINGS CALLS
4 | INTRA-QUARTER DYNAMICS
While the earnings release provides a
snapshot on annual and sequential growth
rates, commentary on the call can often
provide a more in-depth look at what
happened each month. Did the quarter start
out strong and weaken as it progressed?
Did it start weak and strengthen as
time passed? Or was performance
largely consistent throughout the period?
Commentary on what the team saw month-
to-month can certainly help us better
understand how much weight to give the
reported results when looking forward.
For example, during Club holding
Constellation Brands’ (STZ) most recently
reported quarter, the alcoholic beverage
firm’s management team addressed
depletion rates: “As anticipated, depletion
performance accelerated throughout the
quarter, resulting in a 5.5% increase for the
period, an acceleration that has continued
into June.” That told us that the 5.5% result
comes from a weak start and strong finish,
which continued into the following quarter.
The reported quarter ended May 31 and
the call was hosted on June 30, a full month
after the quarter ended. So, as we look ahead
from that call — knowing that May was stronger
than February — and that the acceleration
continued into June, we could deduce that
the depletion run-rate was somewhere above
that 5.5% level for at least the first third of
the current quarter.
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JIM CRAMER INVESTING GUIDES | VOL. 03 | 2023
END OF THE QUARTER THROUGH
THE RELEASE
The second part of the conference call
generally focuses on what management
has been seeing since the quarter ended.
Depending on when the company reports,
this commentary may provide insight
into anywhere from the first two weeks to
the first two months of the current quarter.
Club holding Wynn Resorts (WYNN), for
example, reported results for the fourth
quarter of 2022 on February 8, over two
months into the subsequent quarter —
meaning the company fairly clear idea of
how the first quarter of 2023 was shaping
up by the time they reported for the final
quarter of last year.
Notably for the casino operator, which
maintains significant operations in China’s
special administrative region of Macao,
the Chinese New Year holiday fell in late
January. But with the earnings release
and attendant conference call not taking
place until early February, management
was able to comment on developments
in China as the country lifted strict pandemic
measures and moved to reopen its economy
after nearly three years.
By listening into the call, an investor could
see that the reported results did not
tell the full story around Wynn’s business
in China. “In the casino, mass table drop
reached 95% of 2019 Chinese New Year
levels, with strong play across the spectrum
from premium mass to core mass. In
direct VIP, turnover was 40% above
HOW INVESTORS CAN GET AHEAD BY LISTENING
TO EARNINGS CALLS
pre-COVID Chinese New Year levels, and
importantly, we estimate that our hold
normalized GGR [gross gaming revenue]
market share during the month of January was
consistent with 2019 levels,” management
noted during the conference call.
“Overall, during the Chinese New Year period,
we delivered our strongest EBITDA [earnings
before interest taxes, depreciation, and
amortization] performance since the onset
of the pandemic, approximately $4 million
of normalized EBITDA per day,” management
added.
This sort of commentary around develop-
ments since the end of the reported period
is crucial for markets, which are always
more forward looking. As with the reported
results, any comments on supply chains and
customer dynamics could prove relevant to
the direction of the stock. Additionally, at this
point in the call, investors should listen for
any changes made since the reported results
were finalized, including organic initiatives
like growth and cost savings priorities, or
inorganic growth actions such as mergers
and acquisitions.
Finally, investors should listen for manage-
ment’s higher level, general thoughts on
the operating environment. That can help
shareholders not only think more clearly
about the company in question, but also the
industry and economy more broadly.
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JIM CRAMER INVESTING GUIDES | VOL. 03 | 2023
Club holding Halliburton (HAL) is uniquely
positioned to provide such insight, given
that its business is directly tied to the supply/
demand dynamics of one of the world’s most
important commodities — oil. During its first
quarter 2023 earnings call, Halliburton CEO
Jeff Miller, noted that “everything I see today
validates the strength and duration of this
multiyear upcycle. The world requires more
energy from all sources, including oil and gas,
driven by population growth and economic
development. Multiple years of structural
underinvestment in oil-and-gas supply can
only be addressed by strong activity over
the next several years.”
OUTLOOK
The last section of an earnings conference
call largely focuses on the future. Here
we may receive information on the rest
of the current quarter, or possibly even the
year, depending on how much guidance
management provides. Guidance tends
to come in one of two forms. It can be
quantitative, by which management provides
actual targets for sales, earnings, and/or
industry metrics. Or it can be or more
qualitative, whereby the forecast is more
high level in nature, with commentary
on the state of the industry, supply chain
and customer/end-market dynamics.
HOW INVESTORS CAN GET AHEAD BY LISTENING
TO EARNINGS CALLS
Club holding Microsoft’s (MSFT) guidance
from its most recent earnings report —
which the company only provides on its
earnings call — is a perfect example of explicit
quantitative guidance: “In Productivity and
Business Processes, we expect revenue
to grow between 10% and 12% in constant
currency, or $17.9 billion to $18.2 billion,”
management said. Importantly, the team
provided exact numbers we can compare
to estimates.
Club holding Apple (AAPL), on the other
hand, has been offering up more qualitative
commentary on sales since the start of
the pandemic. During its most recent
earnings call, management said, “We expect
our June quarter year-over-year revenue
performance to be similar to the March
quarter, assuming that the macroeconomic
outlook does not worsen from what we are
projecting today for the current quarter.”
This kind of commentary leaves us with a
bit more guess work to determine if the
outlook is positive, negative, or in line with
what Wall Street has been modeling.
In addition to the guidance itself, investors
should listen for the assumption that went
into generating that guidance. That then
allows investors to subsequently adjust
expectations as fresh economic data rolls
in in the time period before the company’s
next financial update.
The Club’s industrial gas giant, Linde (LIN),
provides explicit quantitative guidance for
the upcoming quarter and full year. And
management usually notes that their approach
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JIM CRAMER INVESTING GUIDES | VOL. 03 | 2023
to guidance is to assume “no economic
improvement,” while clarifying that they are
not making a “macro projection” but simply
using the economic environment at the
time as a “placeholder” that allows investors
to “insert [their] own view of the economy
and adjust accordingly.” Management also
noted that “if the economy improves, we’ll
be above this range. And if not, we’ll take
actions to mitigate.”
Those comments allow investors to better
utilize subsequent macroeconomic data
with the understanding that economic
improvement likely points to earnings upside
for Linde, while deterioration could suggest
a less-than-desired outcome in the next
earnings release. Had you skipped the call,
you would have taken the guidance at
face value and left information that could
potentially give a shareholder an edge
on the table.
Beyond the guidance and assumptions that
went into it, additional commentary from
management at this point in the call might
include thoughts on the near, medium, and
long-term outlook. It could also touch on
how management thinks about operating the
company — including how to balance profits
with growth or whether to invest its excess
cash or return it to shareholders.
In its earnings call for the fourth quarter of
2022, Coterra Energy’s (CTRA) management
gave investors an update to its approach
to cash, noting: “We are pivoting our capital
return priorities to favor buybacks over the
variable dividend,” citing macroeconomic
HOW INVESTORS CAN GET AHEAD BY LISTENING
TO EARNINGS CALLS
shifts like “looming global supply-demand
imbalance” for the oil market.” But management
added: “We’re not backing off our core
pledge to return at least 50% of free cash flow
to our owners in the form of our base
dividend, buybacks, and variable dividend.”
As an investor, it’s important to know what
management thinks the best use of cash
is because whether you agree or disagree
is going to inform your opinion of the
investment’s potential.
Meanwhile, earnings-call comments from
Meta Platforms (META) CEO Mark Zuckerberg
at the start of the year dramatically
transformed the trajectory of the tech stock.
Zuckerberg indicated that the company
was shifting focus away from overspending
in the so-called metaverse to focus on a
“year of efficiency” for the company. Investors
rewarded the move, sending the stock
soaring by over 20%.
AFTER THE CALL
The work doesn’t end just because the call
does. Once the call is complete, it can be
helpful to read over the transcript, which can
generally be found on the investor relations
site a few days later.
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JIM CRAMER INVESTING GUIDES | VOL. 03 | 2023
After investors have reached their own
conclusions on the results and management’s
comments on the call, we can start to
research what other’s thought about the
release and management’s commentary.
This could be news headlines, analyst
takeaways, or simply a discussion with other
investors. Either way, hearing from others
will help us formulate, rethink, reevaluate
or refine our own views on the quarter and
path ahead.
It’s also helpful to review the results and calls
of rival companies in the same sector, or
that of customers and suppliers. Investors
should be thinking about what others related
to the company in question said on their
calls. This could be a peer company,
customer or supplier. We spoke more about
the idea of analyzing peer companies or
those up and down the supply chain in our
review of the semiconductor industry.
An individual investor might not have their
own financial models. But taken together, all
this information can usually help shareholders
get a sense of whether estimates are going
up or down — consensus estimates are often
updated within 24 to 48 hours of a release —
and use that to update their price targets.
At that point, they will have a better sense
of the company’s current valuation and,
ultimately, the current risk-reward profile
of the stock.
HOW INVESTORS CAN GET AHEAD BY LISTENING
TO EARNINGS CALLS
That was the case with Club holding Nvidia’s
(NVDA) most recent report, which included
a monster guide that saw shares surge
over 40% in the following weeks. Despite
the big move, we opted to hold on to all
our shares. That’s because the stock actually
managed to get less expensive on manage-
ment’s forward-earnings estimates, even with
the stock’s post-earnings appreciation. We
didn’t need our own financial model to figure
that out — just an update on the consensus
earnings projections that were available the
following day.
Ultimately, listening to the post-earnings
conference call is an essential piece of
homework required of those who own individual
stocks, allowing shareholders to build — and
revise — a coherent and forward-thinking
investment thesis.
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