Retail sales, housing starts, UPS (NYSE: UPS) / Fed Ex (NYSE: FDX) deliveries and, of course, those infamous corrugated box orders, all provide clues about demand at the retail and wholesale levels, and are positively correlated with increases in U.S. GDP.
Then there are those lower-profile metrics that experienced investors monitor -- and new investors are highly recommended to do so, as well. One such metric: Stanley Works (NYSE: SWK) and on Thursday the hardware and tool giant provided yet another bearish data point for the U.S economy and stock market.
New Britain, Conn.-based Stanley lowered 2008 full-year earnings guidance to $3.30-$3.40 per share, down about 35-45 cents from previous guidance, and also announced it would lay-off 2,000 employees, or about 10% of its work force, citing rapidly deteriorating business conditions. Further, Stanley said "economic conditions remain too variable to warrant issuing formal 2009 guidance at this time."
The Reuters 2008 EPS consensus estimate for Stanley is $4.30. Stanley's shares Thursday closed down $2.02 to $32.30.
Stock Analyst C. Leonard Bauer told BloggingStocks Thursday Stanley is a bellwether for the economic cycle because it manufactures tools, hardware, and specialty products for the professional, industrial, consumer, and home improvement segments. Bauer added that he does not have a rating on nor own shares of Stanley.
"If sales of tools like hammers, saws, pliers and other equipment are declining that is not a good sign for the economy. It indicates a cyclical bottom for construction and manufacturing is not in place. Given Stanley's lowered guidance, we'll be lucky to have the recession bottom by June 2009," Bauer said. "And the lack of 2009 earnings guidance is another major data point concerning business conditions. Credit market uncertainty, Asia demand, the dollar's status, and severity of domestic lay-offs are all major unknowns for Stanley and for the U.S. economy. Given these uncertainties, anyone expecting a quick 2009 improvement in the U.S. economy and the stock market is likely to be sorry. We have more tough sledding ahead."
Market / Economic Analysis: Investors ignore the tool / hardware sales trend of bellwether Stanley Works only at their financial peril. Stanley's reduced earnings outlook suggests a U.S. economic contraction that's likely to continue through Q2 2009, which will keep stocks under pressure at least for much of the first half of the new year.
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Reader Comments (Page 1 of 1)
12-12-2008 @ 1:41AM
BHarrison said...
Per a construction news article in the Miami Herald today, it is projected that financing for 99% of major construction projects is currently not available . . . and based on conversations with other professionals in the industry, due to the market saturation with over construction previously, this situation will probalby continue for at least two years or longer.
The only foreseeable constrcution will be public works projects . . . schools, public buildings, etc. Will our construction industry simply substantially fade away? What about the capital investment in construction equipment what will happen to all of that equiment? Where will all of the construction personnel, and the architectural and engineering personnel go to for employment? What about all of the suppliers, and manufacturers; where will their employees find work? Is 80% - 90% of our construction industry going to just "fade away"? And what happens to the investors in the industry.
And all of these unemployed workers will not be spending money except for essential purchases, if they can even do that. The ripple effect of substantially retracted spending will spread throughout our nation . . . and that is just for the construction industry.
Our economy is basically fueled by the construction industry, the automobile industry, and the finance industry . . . and ALL THREE of these industries are being "slashed to the bone" . . . and cannot possibly recover for at least three years or longer. People without jobs cannot buy goods and services to fuel the economy. This IS a downward spiral.
George Bush should have been IMPEACHED; and now he should still be tried for misfeasance and malfeasance . . . and probably "CRIMES AGAINST HUMANITY.
A vast number of our Congressmen should be voted out of office or removed by recall elections; and all of the CORRUPT CEOs, CFOs, and upper management personnel who were part of orchestrating and pertpetuating the FRAUDS of the pyraamid and Ponzi schemes should be indicted, prosecuted, and given substantial prison sentences and fines.
Congress must pass legislation setting standards for "oversight and regulation" of the FIs and the corporations in order to provide the Fed, the SEC, and other regulatory agencies to restore INTEGRITY to our business enterprises and markets.
Investors are not going to risk investment in volitile, chaotic, and manipulated markets. Or risks losing their principles by starting business. When the professional managers of the institutional funds prefer to invest in "ZERO INTEREST RATE" government T-Bills, rather than in the stock market, then that should indicate that it is a "Fool's market" . . . If those guys won't invest in it, then why would any other prudent man invest in it.
The first things that we need to do is to throw all of the "crooks" out of Congress and our business enterprises; and restore INTEGRITY to our business enterprises and stock markets. If that isn't done, then things will look pretty bleak for a long time.
12-12-2008 @ 1:03PM
dunno said...
The construction bubble burst. Wouldn't this be the result of the subprime mortgage situation? Any one could've bought a home until recently. That allowed new homes to pop up everywhere. How about foreclosed homes? Why build a new home when you can find a recently built home at a bargain, wouldn't that hamper new construction?