Industrials Turn Upwards

Stocks reversed two weeks of soft declines Thursday, as the Bureau of Labor Statistics released a report showing that nearly 400,000 more jobs have been created than was previously thought. Despite a sharp drop in manufacturers' orders for durable goods, as a whole, the capital goods and transportation sectors outperformed the Dow Jones Industrial Average. Big winners and losers in each sector were largely determined by earnings announcements or guidance changes, as companies begin releasing quarterly results.

One of the day's biggest gainers was Eagle Materials (NYSE: EXP  ) , which was up nearly 10%, after announcing a new public offering. The wallboard and cement maker will offer 3 million shares, up from its current 45 million shares, in order to raise capital to acquire cement plants.

Also strong was recreational vehicle and bus manufacturer Thor Industries (NYSE: THO  ) , up nearly 6%. Thor announced that in its 4th quarter, net income was up 20%, compared to Q4 of 2011, while net income for 2012 was up 15% from 2011. Despite prolonged weakness in consumer confidence, RV sales have remained solid, and this segment contributed most of Thor's performance.

Diversified industrial product manufacturer Actuant (NYSE: ATU  ) was down nearly 5%, after announcing a net loss for the quarter of $16.5 million, or $0.23 per share. Earlier this month, Actuant warned that it expected to take a $60 million non-cash write-down on goodwill and intangible assets in its Mastervolt division, a company it acquired in 2010 for $150 million. Excluding the write-down, Actuant earned $0.55 per share.

A 13% month-on-month drop in durable goods was mostly due to a poor showing by transportation-related goods, but investors weren't surprised. Boeing (NYSE: BA  ) , for example, was not expected to repeat its July performance, when it booked a single order for 150 aircraft from United Continental Holdings (NYSE: UAL  ) following June's Paris Air Show. Boeing shares were virtually unmoved, down 0.2%.

United Continental, on the other hand, was down nearly 4%, after announcing that it expected passenger revenue to fall 1% to 2% over the next quarter. Several other passenger airlines were down on the news, as well, indicating expectations of slower passenger travel. While this might indicate slowing demand for Boeing's planes, the company has a massive backlog of orders, which should keep its plants at full capacity for years.

A bigger worry for Boeing and other defense contractors was the Commerce Department's announcement Thursday that defense capital orders were down 40% in August. With big cuts in the defense budget set to take effect in the next president's term, contractors and agencies alike are preparing to slim down.

Of course, the next president, whether or Obama or Romney, will be able to manage or avert these cuts. The two men have very different ideas about how to set the budget straight, but investors can profit from the election of either candidate. The Motley Fool can help you get a strategy in place, with a special report on four companies to buy before the 2012 election. This report is free, and with only one month before the election, you should get your copy now.

 

Daniel Ferry has no position in any of the companies discussed above. Motley Fool newsletter services have recommended buying shares of Actuant. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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