CNBC's Jim Cramer is noting an emerging theme early in this earnings season: Several companies have missed expectations in their quarterly reports, but their stocks rallied anyway.
That kind of action can be found in enterprises covering the railroad, manufacturing and health-care industries whose shares rose on "not-as-bad-as-feared" results, he said Thursday.
"All of these not-as-bad-as-feared quarters are good news for shareholders who haven't been shaken out by the all the darned naysayers," the "Mad Money" host said. "More importantly, they're a reminder that execution matters."
Union Pacific reported what, even by its own admission, was a disappointing quarter with weak cargo sales in large part due to economic weakness in autos, lumber and agricultural exports to China, Cramer said. The stock originally fell in premarket trading Thursday but ultimately gained 0.2% during the session after the shareholder call. Volumes were weak, but the company still made a lot of money thanks to expense control and layoffs, he said.
"It's a testament to the fact that this is a changed enterprise," Cramer said. "So even though Union Pacific's operating revenue was down 7%, guess what, their operating income only declined by 2%. ... That's how you get a not-as-bad-as-feared quarter. I mean that's how a railroad stock can rally off of a revenue shortfall."
Software industrial conglomerate Honeywell also managed to gain nearly 2.4% on the trading day, despite missing Wall Street's revenue expectations, Cramer said. Investors were concerned how Boeing's 737 Max issues would weigh on Honeywell's aerospace arm, but the business had 10% organic sales growth, he said.
Johnson & Johnson, which is facing legal challenges related to the opioid crisis and talc, is another example. Though investors worried how litigation would impact business, the pharmaceutical company delivered top- and bottom-line beats in its earnings report Tuesday. JNJ shares have risen more than 4% since Monday's close.
"Instead the company proclaimed it was ready for any and all verdicts, which, by the way, have recently [been] going into their own right direction," Cramer said. "That, and some fabulous blockbuster drugs and some solid device numbers explain how JNJ could have a NABF."
IBM, on the other hand, was not saved by the "not-as-bad-as-feared" sentiment. Red Hat, which the company acquired earlier this year, was not enough to offset the decline in Big Blue's noncloud legacy business, he said.
Disclosure: Cramer's charitable trust owns shares of Johnson & Johnson and Honeywell.