Jim Cramer explains why it’s important to look for nuance during earnings season

CNBC’s Jim Cramer reflected on the earnings season so far, saying investors shouldn’t judge stocks based purely on figures from a financial report. Instead, he said it’s wise to read beyond “negative headlines” to better predict a company’s performance.

“You know what the biggest takeaway is?” he said, referring to earnings season. “It’s the way we report on stocks, all of us: It’s not working anymore, it’s failing us, it’s too glib, too inconsistent, too unrepresentative of a company’s worth. The reportage is causing people to make snap judgments that turn out to be false judgments, and it’s got to stop.”

Cramer used Home Depot $Home Depot(HD.US)$ and Lowe’s recent earnings as an example.

Although Home Depot’s earnings beat Wall Street’s expectations, its sales declined year-over-year. But comments from CEO Ted Decker about the home improvement giant’s inventory made Cramer optimistic. Decker indicated that Home Depot managed to reduce its inventory over the past year and now feels good about its “inventory position.” Cramer said this sets the company up for much better earnings in the future.

Lowe’s also saw its sales decrease and CEO Marvin Ellison said in an interview with CNBC it expects demand for do-it-yourself projects to “remain under pressure in near term.” But Cramer was encouraged that sales to home professionals, like plumbers, electricians, and contractors, were flat, and that Ellison saw strength in the company’s building materials sector.

Cramer predicted that TJX $TJX Companies(TJX.US)$ would see success despite less-than-ideal earnings where management issued light guidance. According to him, investors should instead focus on the fact that the off-price retailer said it had no shortage of discounted merchandise.