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TheStreet.com's Jim Cramer says the different reactions to these earnings underscore the difference between two good quarters. You have to contrast a Coach (NYSE: COH) (Cramer's Take) with a US Steel (NYSE: X) (Cramer's Take) to get a sense about where this market is going.
First, the obvious -- there are too many Coach bags and bags of its ilk, and there isn't enough steel. Second, Coach couldn't pass on a price increase to save its life. Every price increase sticks for US Steel.
Third, on the Coach call where does Lew Frankfort -- who is great! -- want to expand? The U.S. Ouch! Worst market in the world. Saturated. No growth. Feeling poor.
Where does US Steel want to expand? Doesn't matter. The demand is so great it's really an issue of shipping, as CSX's (NYSE: CSX) (Cramer's Take) Michael Ward would tell you -- at least he told me last night on "Mad Money."
X has higher input costs across the board, but the demand is so great for its steel it doesn't even matter.
Meanwhile, Coach has a big increase in inventory, explained away in part by a dramatic yen appreciation -- actually makes sense when they walk you through it -- but otherwise explained by a macro environment that is just awful.
Now, here's the tough part: Both companies are buying back stock. Both companies believe in their stock. I ask myself, other than a lower-than-usual multiple, what is there to believe in in Coach? Why would this market come back anytime soon?
US Steel? It's got so much money it is hard-pressed to do anything else with it, although it is expanding. (As opposed to, say, AK Steel (NYSE: AKS) (Cramer's Take), which needs the money to pay down pensions.)
This contrast really is what's at the heart of why one stock goes up on a better-than-expected quarter and one goes down.
Supply and demand. Too many Coach bags, not enough steel plate.
Random musings: Hosting "Squawk" this morning, check it out.
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.
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