At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we'll be tracking the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best …
Rumors of the manufacturing industry's demise have been greatly exaggerated. That seems to be the upshot of UBS's upgrade of heavy industrialist Eaton (NYSE:ETN) yesterday.

And yet, as is so often the case with UBS's stock ratings, we don't know much about the specifics underlying the analyst's conclusion. Continuing what a Fool can only presume is established corporate policy, UBS once again released just its rating -- full stop. No details -- at least, none reported in the mainstream press. No context. Read into the new "buy" rating what you will.

Read it ... and weep
Lacking the all-important context behind the rating, your decision on whether to follow UBS's advice may depend largely on how you interpret the analyst's record on similar picks. So let's focus on the industrial sector of the economy, and look at a couple of stocks here that UBS has called right ...

 

UBS says

CAPS says

UBS's pick beating S&P by

Caterpillar

Underperform

****

26 points (2 calls)

Jacobs Engineering

Outperform

****

35 points

3M  (NYSE:MMM)

Outperform

*****

13 points

... as well as a few out of the much larger number that it's called wrong:

 

UBS says

CAPS says

UBS's pick lagging S&P by

Terex (NYSE:TEX)

Outperform

*****

35 points

Dow Chemical (NYSE:DOW)

Outperform

****

34 points

U.S. Steel (NYSE:X)

Outperform

****

32 points

Cummins (NYSE:CMI)

Outperform

****

28 points

I can't say I'm terribly impressed with UBS's record in the sector so far. Granted, the banker's overall record on CAPS looks respectable enough -- it's getting more picks right than wrong, and it ranks in the top 10% of the investors we track -- but it does appear to have been taken unawares by the sudden collapse in manufacturing.

Good Eaton
Now mind you -- I'm as attracted by Eaton's valuation today as much as the next bargain-loving Fool. The stock's trading for less than a 7 P/E. Analysts expect Eaton to survive this recession and go on to post long-term earnings growth of 11% per year. And while Eaton has not yet deigned to provide its shareholders a glimpse at its most recent annual cash flow statement (despite reporting earnings more than two weeks ago), my best guess is that the firm generated somewhere in the neighborhood of $950 million in free cash flow last year. If so, that would have the company trading at an enterprise value-to-free cash flow multiple of less than 12. All of which tells me the stock is relatively cheap.

That said, U.S. industry is currently struggling with what Honeywell (NYSE:HON) CFO Dave Anderson recently called "a time of greater uncertainty than I think any of us have ever experienced or lived through." Industrial output sits at a 28-year low, and some of the biggest names in manufacturing seem more concerned with laying off workers than building new products. For its part, Eaton expects 2009 revenue to decline 8% from that of 2008.

Foolish takeaway
All of this tells me that just because Eaton looks cheap doesn't mean it can't get cheaper. And if I'm going bottom fishing, I'd prefer to follow the lead of a banker with more skill at the sport than UBS currently demonstrates. At worst, I'll miss a bargain -- but there are plenty more where that came from. At best, I'll get to pick up shares of one of the world's greatest manufacturers at an even deeper discount than today's -- and at a better price than UBS got yesterday.

3M is a Motley Fool Inside Value recommendation. The Fool owns shares of Terex.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 557 out of more than 125,000 members. The Fool has a disclosure policy.