What: Eaton Corporation (NYSE:ETN) shares rose a little over 12% last month. That's a nice reprieve for investors, since at one point, the stock was about 30% off where it was in January 2015.
So what: That 30% drop is notable because the nadir occurred in early January 2016. (In other words, 2015 was a very rough year for shareholders.) So the 12% advance in February was the continuation of a rebound off that low. The shares are up around 18% or so since around mid-January. But here's the thing: Nothing much has changed at the company.
Eaton is still expecting 2016 to be a difficult year, with organic growth just slightly in the negative column. That's not a great prognosis, and it's led the company to put in place a third round of cost cuts. The goal is to align its various businesses with the current market conditions.
And since there's no indication that the economic headwinds that led to that forecast and several restructuring efforts are about to change, there's no material news to suggest things are changing operationally. In fact, the company's outlook is generally in line with that of other industrial players. For example, Emerson Electric is projecting an organic sales decline of as much as 5%. Eaton's call is for a drop of between 2% and 4%.
However, after such a deep bruising in the market, the stock may have started to attract value investors and those enticed by its over-4% dividend yield.
Now what: Eaton is a well-run industrial giant with a global focus. Although it's facing economic headwinds, it's still very profitable. It also sports a nice dividend yield. So there are plenty of reasons to like Eaton, if you take a long-term view. However, the price jump in February is more likely just a bounce up after a steep decline that drove the shares to a point where value hunters stepped in. There's little reason to think the company's business fortunes have suddenly improved.