Trading Nation

The surprising — and bullish — new trend in corporate earnings

Key Points
  • One of the most notable findings from firms' results has been revenue figures.
  • Earnings growth for the remainder of 2017 looks strong, according to Jonathan Golub, chief U.S. market strategist at RBC Capital Markets.
  • Growth this quarter can largely be attributed to a pickup in global activity, Golub told CNBC.
Earnings learnings with Jonathan Golub

As first-quarter corporate earnings season wraps up, one of the most notable findings from firms' results has been revenue figures.

Overall, companies have reported sales that are 1 percent above expectations, above the one-year and five-year averages of 0 percent and 0.1 percent, respectively, according to FactSet data.

This quarter's rather strong earnings results were different from "all other quarters we've had throughout this whole recovery," in that the earnings gains have been driven more by reported revenue figures than by margins, said Jonathan Golub, chief U.S. market strategist at RBC Capital Markets.

The growing revenue has supported an overall strengthening earnings picture.

"Right now, it looks as if in the next three quarters, we're going to have a 10 percent growth rate, a 9 percent growth rate and an 8 percent growth rate, which means that the entire year is going to look very, very strong," Golub said in an interview Friday on CNBC's "Trading Nation."

The strong growth can be largely attributed to a pickup in global activity. For example, even when discounting the benefits from buybacks within U.S. companies this quarter, that would still leave about 13 percent earnings growth. And for European companies, that figure would come to 23 percent growth, "which is just an extraordinary number," Golub said.

The blended revenue growth rate for the first quarter came in at 7.8 percent, according to FactSet. If that figure is in fact the actual revenue growth rate for the quarter, it will mark the highest year-over-year growth reported by S&P 500 companies since the fourth quarter of 2011 (at 8.1 percent). Ten sectors have reported or are reporting year-over-year growth in revenue, led by energy. This leadership may come as no surprise, as the first quarter of 2016 was a particularly painful one for oil prices.

The only sector that has reported a decline in revenue, according to FactSet, is the small telecommunications group.

Furthermore, S&P 500 companies that are more globally exposed than others (those that sell more abroad than domestically), are "just ripping," Golub said, which leads him to believe that this is a global story of growth as opposed to simply domestic growth.

"As long as the underlying environment stays strong economically, and all indications are that it will, I think you're much better off playing this in global companies," he said. Specifically, he would favor Japanese and German exporters.

"This is really a global reflation trade," he said.