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Cramer: ‘Massive layoffs’ main theme in earnings

Earnings season thus far has been filled with stories of bountiful bottom-line numbers, with top-line revenues failing to impress. When earnings resume on Tuesday, Jim Cramer expects to see the earnings winning spree continue.

"It is worth pointing out though, they are winning in a pretty heartless way — through massive layoffs," the "Mad Money" host said.

Cramer pointed out that the stocks that are the strongest this earnings season are the same companies firing most aggressively.

The railroads have been among the strongest groups since quarterly earnings began. Norfolk Southern's revenues were down an astounding 6 percent and expenses shrank 13 percent, which produced an upside surprise on Wall Street. Yet, the average headcount for the quarter declined by about 1,900 positions.

CSX had the same formula for success, with a stock that jumped to $27 from $24, and a 13 percent reduction in headcount. That is nearly 4,500 fewer employees versus last year.

Read MoreThis quarter's earnings season trend—layoffs

Job cuts pink slip
Tom Grill | Getty Images
"It is worth pointing out though, they are winning in a pretty heartless way — through massive layoffs." -Jim Cramer

The second best performing group in earnings season were the banks. Bank of America's stock rose to $15 on Friday, up from $13. Cramer said it was no coincidence that it also cut costs aggressively.

With many branches closed, in part because of mobile banking, Bank of America's headcount was down 7,000 employees year over year, even as it still has 213,000 employees.

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Likewise, Morgan Stanley had a 25 percent headcount reduction in fixed income, and Goldman Sachs indicated it cut its fixed income, currency and commodity workforce by 10 percent. JPMorgan actually added employees, but its headcount is down by 4,000 from the year before.

"These banks keep getting leaner and leaner, and the market loves it," Cramer said.

Oil service firm Schlumberger has fired an astounding 42,000 people since the peak in 2014, including 8,000 this quarter. As a result, Schlumberger has been immensely profitable and bought back 7.1 million shares at $67.43 during the quarter. The stock closed at $78 on Monday.

Halliburton's stock ran to $40 from $28 in anticipation of a strong quarter next week. It confirmed that it shrank its workforce by 6,000 jobs in the first quarter. Additionally, it has cut its headcount by roughly 33 percent since the top in 2014.

Heavy machinery stocks have also been on fire. Caterpillar is up 12 percent for the year, in part due to an early retirement of 2,100 employees and closing five plants, which took another 670 jobs since the announcement in January.

When Intel reported recently, it provided a gloomy forecast. Yet, the stock barely budged.

"I think it is because management is taking extraordinary action for a growth company, laying off 12,000 people," Cramer said.

The real conundrum for Cramer is that despite these layoffs, jobless claims in the U.S. hit a four-decade low last week. The last time there was a figure lower than Thursday's 247,000 claims was on Nov. 24, 1973.

Ultimately, these job cuts serve investors who want to see higher gross margins and expense reductions. This will prompt stronger cash flow, which can then be returned to shareholders in the form of dividends and buybacks.

Channeling '80s pop star Pat Benetar, Cramer said, "We don't necessarily want to break little hearts like the one in me, but unless executives hit the workforce with their best shots and fire away, their stocks aren't going anywhere."

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