Who Saw It Coming?
Last Wednesday when Jim recommended Eaton, which, by the way, was up $7.45 or 19% from where we made the recommendation as of Thursday's close, he emphasized that one of the most important things to look for in an industrial stock right now is whether or not it saw the slowdown coming. Eaton did, and so it's been able to cut back production and limit how much damage the recession does to its earnings.
On Thursday we learned that U.S. Steel, another industrial stock we've talked about a lot lately, although with less enthusiasm than Eaton, highlighting it at lower levels where it had a higher yield, also saw the slowdown coming. Here's the Journal on US Steel's quarter:
"U.S. Steel said it felt demand for steel slow at the end of the third quarter and quickly started to reduce production at its mills in North American and Europe. The company said it will continue to operate at reduced levels, corresponding to customer order rates."
That's good news for U.S. Steel, although Jim's maintained that as far as steel producers go, he prefers Nucor.
We saw something else from U.S. Steel Thursday that Jim predicted on Monday: a big estimate cut. Jim said this would happen after the company reported, that lower estimates would come in a wave, and it looks like that wave might be starting. The analyst who covers U.S. Steel at J.P. Morgan cut his earnings forecast for 2009 from $29 to $9.50.
To be honest, when we were putting the U.S. Steel story together, we thought that J.P. Morgan had just forgotten about the stock because its numbers had gone unchanged for so long. I guess they're finally paying attention. That number is probably still too high and more estimate cuts should be on the way. Since the stock has surged lately, propelled, as Jim explained on Thursday night's show, by big investors pouring money into the S&P futures, this might be a good time to take profits if you bought the stock lower just in case the fundamentals become important again.
Cliff Mason is the Senior Writer of CNBC's Mad Money w/Jim Cramer, and has been that program's primary writer, in cooperation with and under the supervision of Jim Cramer, since he began at CNBC as an intern during the summer of 2005. Mason was the author of a column at TheStreet.com during 2007, which he describes as "hilarious, if short-lived." He graduated from Harvard College in 2007. It was at Harvard that Mason learned to multi-task, mastering the art of seeming to pay attention to professors while writing scripts for Mad Money. Mason has co-written two books with Jim Cramer: Jim Cramer's Mad Money: Watch TV, Get Richand Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer). He is 100% responsible for any parts of either book that you did not like.
Mason has also had a fruitful relationship with Jim Cramer as his nephew for the last 23 years and will hopefully continue to hold that position for many more as long as he doesn't do anything to get himself kicked out of the family.
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