Cost Cuts Drive Better-Than-Expected Quarters

The market has been seeing more earnings beats than one might expect during a recession. Just look at the companies that reported great numbers on Thursday: First Solar, Starbucks, NYSE Euronext, Dow Chemical and Owens Illinois, all of which finished the day higher – with First Solar up $36.

There’s a difference, though, between these better-than-expected quarters and those we’d typically define as “beats.” First Solar was the only company among the group that actually grew its business, as better sales and cost cuts led to wider gross margins. So it’s no wonder the stock shot so high. But the other firms surprised investors only because of its cost cuts, Cramer said. And these days that is good enough for Wall Street.

More than that, though, is the outlook going forward. As lean and focused as these companies are right now, their profits margins will only increase once the economy really turns up. So the big money is pouring into SBUX and NYSE in anticipation of that.

Cramer had to admit he wasn’t exactly right about Dow Chemical and Owens Illinois . He’d honored Dow CEO Andrew Liveris with a place on Mad Money’s Wall of Shame for overpaying for Rohm & Hass, saying the company would never fulfill its promise of cost savings. But cost cutting was a main reason the stock jumped more than 18% on Thursday.

OI, too, soared 32% today after cost reductions replaced sales growth as the path to profits. Cramer doubted there was any money to be made by going green with this glassmaker.

Luckily for investors, President Obama reverted to his anti-Wall Street self – however temporary we hope – during the Chrysler bankruptcy press conference this afternoon, when he attacked hedge funds for being too greedy. That, Cramer said, is why the Dow lost 18 points today, while S&P 500 slipped one point. And that just gives investors a chance to buy these cost-cutting outperformers at a much better price.

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