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Cramer: Why Apple's revenue decline is bullish for the stock

Cramer: Why Apple's revenue decline is bullish for the stock
Cramer: Why Apple's revenue decline is bullish for the stock

Companies reporting on Tuesday unveiled earnings that were just "good enough" for Jim Cramer, yet those were the companies that triumphed above all in the market.

"There are more companies that are reporting in-line and therefore disappointing numbers right now, and that is not good enough. Hence the suboptimal performance of the averages," the "Mad Money" host said.

The ultimate good enough stock was Apple, which reported a 15 percent decline in revenue. Yet, the stock soared after hours on Tuesday.

How the heck could a decline be bullish?

"Simple, because there were many worries, even among the bulls, that it would be worse, maybe far worse than that," Cramer said.

I stand by my call to own Apple, not trade it, and I think this quarter could very well mark the bottom of the cycle.
Jim Cramer
Tim Cook, chief executive officer of Apple Inc.
David Paul Morris | Bloomberg | Getty Images

The earnings were far better than Cramer expected three months ago, and he thought they could have been even better if Apple hadn't been constrained on supply for its phones. Additionally, its service revenue stream continues to grow.

"I stand by my call to own Apple, not trade it, and I think this quarter could very well mark the bottom of the cycle," Cramer said.

Twitter delivered what appeared to be good earnings to Cramer, but its forecast was terrible, so he put it in the "distinctly not good enough category." It's time for CEO Jack Dorsey to make a choice between Square or Twitter, Cramer said.

Three other "good enough" were Texas Instruments, United Technologies and DuPont, which all delivered 2 percent growth when they reported. The market gobbled it up because in a world of no growth, 2 percent is good enough.

After all, it was better than what 3M, Honeywell and General Electric had to offer.

In an interview with Cramer on "Squawk on the Street," United Technologies CEO Greg Hayes explained how his stock reacted positively to that kind of growth — through execution and innovation.

That innovation included cost cutting, which Donald Trump has criticized the move to close Carrier's plant in Indiana to move labor to Mexico. In Cramer's perspective, Hayes had to make this move for United Technologies to generate cash flow.

"Without innovation and cost cutting, companies can't get the kind of profitable growth that this market demands to send their stock higher," Cramer said.

In some cases companies that even missed the numbers were still rewarded, as long as they gave a positive outlook. Las Vegas Sandsfailed to beat estimates, yet because the CEO gave hope for its Macau operation, the stock rose more than 6 percent.

On the flip-side, McDonald's failed to hit its 2 percent benchmark and the stock crumbled, down more than 4 percent. The stock ran ahead of the quarter because investors thought there could be big numbers from its relationship with Pokemon Go in Japan. That didn't happen this quarter, and now investors have called for CEO Steve Easterbrook to do more than just offer all-day breakfast.

"I say give him a break. The whole restaurant business got hit with two big downgrades today, even as the money is now flowing into retail as we hear about good sales from Gap Stores and Nordstrom. They are as oversold as the restaurants were overbought," Cramer said

Ultimately, too many companies are reporting in-line earnings, which are disappointing for Cramer. That is just not good enough.

"So let's just say that, at this moment, good enough counts as a rare triumph in a pretty tough environment," Cramer said.

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