"Surprise" corporate earnings can fool investors

September 18, 2009

The Dow is up; more public corporations have been reporting positive quarterly earnings-but which companies are really performing well?

The Dow is up; more public corporations have been reporting positive quarterly earnings-but which companies are really performing well?

"Earnings are surprisingly on the upside, not due to a great increase in top-line revenue growth, but because of cost-cutting measures," says investment adviser Patrick W. Fisher, CFA, with Schneider Downs Wealth Management Advisors LP in Pittsburgh. "That's not the best reason you want to see for improved earnings."

Other than revenue growth, a better sign of a company's health is news about it opening a new facility, launching a new product line, or adding personnel, according to Fisher. Regardless, Fisher doesn't advise trying to pick stocks on a one-by-one basis.