Unfortunately, only Eaton managed encouraging action -- and due to company-specific factors, in my humble view. These included such metrics as new orders booked in October (watch for this from other heavy industrials). As a result, I assigned greater weight to the market's muted response to a potential trough earnings scenario from BorgWarner, which proffered an eek-type guidance revision. With U.S. Steel, as well, the market ignored favorable comments on the fact that trough spot pricing had been reached and that prices on new orders late in the quarter.
The read: Valuations are still in adjustment mode to as-yet-unforeseen risk factors in the remaining third-quarter earnings releases and in the fourth quarter. In total, the market continues to be short-term-minded.
Executives continue to highlight "absolute" operating profit margins, not "absolute" operating profit margins plus their direction -- which, we would hope, is higher. This is a small trick that I utilize to gauge confidence in forward outlooks, when I want to feel that sense of "selling the story." I remain disappointed in the stories being told. If CEOs, CFOs or division presidents aren't playing convincing cheerleaders, why should the market throw a bit of enthusiasm in the way of the underlying stock as the company deals with horrid financials?
The market is not enamored with product price increases from companies, hypothesizing that these are unsustainable in the front half of 2013 if volume continues to be suppressed. We have to keep inventory turning in order to drive operating cash flow, so revenue shortfalls could force the hands of management in the form of price discounts.