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The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.



) -- Third-quarter earnings season is in full swing, with 315 S&P 500 firms reporting through Oct. 28, with enough data, in our view, to get a decent picture of what the full quarter may look like.

Of the 315 firms, 71% beat consensus expectations, and the estimated aggregate earnings-per-share growth rate is 16.3% year over year -- and an acceleration from the second quarter. If the remaining 185 companies follow suit (which seems likely), U.S. businesses will log their eighth straight quarter of rising profits, reaching another new high.

Of course, earnings alone don't paint the full picture. Firms don't necessarily need higher sales to reap higher profits -- slashing costs would accomplish that, too.

In our view, corporate revenue growth is perhaps the more compelling story because revenue is a more direct reflection of global demand. The 312 companies reporting thus far averaged 10% year-over-year aggregate per-share revenue growth in the third quarter. Higher sales, not lower costs, helped fuel robust profits. And revenue growth has been strong and generally increasing in recent quarters, as shown in Exhibit 1:

Earnings growth was also broad-based, with nine of 10 standard sectors showing earnings growth and all on track for higher revenues. Profits declined only in utilities -- by a mere 1.9% at that. That isn't surprising since Utilities is a classically defensive sector.

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Exhibit 2 shows each sector's year-over-year earnings and revenue growth. Note the outsized contributions from economically sensitive energy, materials, industrials and consumer discretionary.

Even the poor, beleaguered financials notched a gain in both categories, suggesting the sector hammered the hardest in 2008 is much healthier now than it was -- a nice corollary, in our view, to the fact U.S. GDP, adjusted for inflation, has surpassed its previous peak (though the third-quarter GDP is subject to multiple revisions).

All good news thus far. But some posit strong growth can't continue, citing a recent drop in analysts' aggregate fourth-quarter earnings growth expectations. Yes, fourth-quarter expectations were ratcheted down 3.5 percentage points, the biggest downward revision in expectations since April 2009.

But expectations are still for 16.7% growth -- still very strong and, at this point, an acceleration from the third quarter. It's very difficult to put that in a negative light. In our view, the fundamentals continue to support ongoing profit growth. The advance estimate of the third- quarter GDP showed stronger-than-expected consumer spending -- a trend we think likely continues.

On the supply side, inventory levels remain very, very low (in fact, falling inventories were the largest detractor from third-quarter GDP growth), and capacity utilization remains on the low side at 77.4%. So while supply is tight, firms appear to have flexibility to increase production without a substantial marginal cost increase.

Also supporting continued business expansion is the record $2 trillion in cash on non-financial companies' balance sheets. As firms channel these funds into expansion, increased output and research and development, overall business activity should keep rising.

Yes, the U.S. economy is officially out of "recovery" and into expansion. What's more, economic and corporate health still seems largely unappreciated and sentiment still very guarded. That gap between reality and sentiment should prove an additional positive for stocks moving forward. Additional Sources: US Bureau of Economic Analysis; US Federal Reserve. (This article constitutes the views, opinions, analyses and commentary of Fisher Investments as of November 2011 and should not be regarded as personal investment advice. No assurances are made Fisher Investments will continue to hold these views, which may change at any time without notice. In addition, no assurances are made regarding the accuracy of any forecast made herein. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.)

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.