Looks like Europe may have hit bottom

This isn't to suggest it'll rebound. But it may just stay at this level -- far better than further deterioration.

By Jim Cramer Apr 30, 2013 8:48AM

thestreet logo

Europe © Photodisc SuperStockWhat would happen if Europe bottomed out? No, not if it went up, but if it simply bottomed out? That's what the European stocks, which hit five-year highs Tuesday, might be signaling. Monday night I talked to two CEOs on "Mad Money" -- Sandy Cutler from Eaton (ETN) and Chuck Bunch from PPG (PPG) -- and both indicated that Europe might be hitting bottom and that it may not decline much if at all from the current levels.


For Cutler, who has a huge electronics business in Europe, the continent is mired in molasses, but it may not be getting any worse. Yes, the business is terrible there, but it might just be staying terrible instead of deteriorating further.


Bunch goes a step further and says he thinks the first quarter might be the worst, and that things might actually get better by year-end.


These are not idle sentiments. Last week, when Starbucks (SBUX) CEO Howard Schultz gave his overview, he said he thought Europe was bottoming. Colgate (CL) indicated the same.


Now, there are many companies, including technology companies, that would indicate things are still getting worse. There are auto companies that say it is getting much worse.


But the CEOs of PPG, Eaton, Starbucks and Colgate aren't pie-in-the-sky guys. They are very smart people who know what their order books look like and have all been very accurate at forecasting -- which is why their companies have been able to navigate this treacherous period so well.


If that's the case -- if Europe's bottoming -- then both Eaton and PPG would be buys (my Action Alerts PLUS charitable trust owns Eaton). That's because these companies have taken out tremendous costs in Europe, and are not willing to wait around for revenue to turn. If sales do turn around, meanwhile, the leverage would be magnificent.

As it is, PPG is seeing good strength in its China business because it is geared to autos -- which, like PPG's business in the U.S., is very robust. So if the U.S. remains moderately strong, and if Europe stops getting weaker, that could be the recipe for a major upside surprise. Keep in mind that PPG's major raw ingredient for coatings, Ti02, is in glut in Europe. That bodes well for gross-margin expansion.


Eaton's business in the U.S. is stronger than it has been in ages because it has merged with Cooper and it is taking out huge costs. That's why the gross margin, reported Monday morning, was so awesome. But this is the company's weakest quarter each year, and I bet if Europe ceases to weaken you could see some very good numbers here, too.


You could quibble with this positive outlook, but you can't quibble with the European stock market, which has now rallied to five-year highs off the idea that austerity is no longer going to be the mantra. That's in part because Germany has just turned weak, and in part because there is such high demand for bonds, even from the ne'er-do-well countries like Italy and Spain. Germany needs its export markets to do better if it wants to keep from sliding into a recession. The rest of the continent is fed up about the lack of employment. Politically, it's the right time to rebel against the orthodoxy.


Maybe that's what people see? I don't know. But, for the CEOs I'm talking to, I don't think they are looking at political tea leaves. They are looking at order books, and a stagnant order book is a lot better than one in free fall.


 jim cramer

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long ETN.  

 


 

More from TheStreet.com

54Comments
Apr 30, 2013 9:40AM
avatar

European stocks, which hit five-year highs Tuesday, might be signaling that they have bottomed?

 

What kind of crazy logic is that?

Apr 30, 2013 10:40AM
avatar
Europe has significant systemic problems that still haven't been addressed.  You can only tread water for so long, especially if people keep handing you brick after brick after brick.
Apr 30, 2013 10:48AM
avatar

"Europe has significant systemic problems that still haven't been addressed."

 

This couldn't be more true. Europe has over 60 million portable businesses making up for the lack of diversity in it's big foreign-owned retailers. It has significant job woes. People have stopped looking for the traditional jobs because favoritism rules like our own glass ceiling. Rural and sub-economic business has to thrive because it's all many areas have. Maybe the "European Union" was good on paper, but the people needed to flush every bureaucrat out of office and start fresh with ethics and character. The odds of revival in Europe are zero. What makes it worse is-- that America put huge sums or cash into "shark" financial credit programs that were abysmal failures. It's one thing to make a calculated error, but our financial sector went in for greed not humanity. We are wasting precious time by not going into Wall Street and flushing our own pariah out. Lawyers, financiers, bankers, administrators, career politicians, paper and button pushers... you've ruined the world... go find another one TODAY and make for it.

Apr 30, 2013 11:33AM
avatar

What pisses me off is we Americans have the economic technology to grow at 5 to 8%, but we are sitting on our asses. Our enemy is ourselves and our government (the president, congress, and the fed). Final consumption sales tax, the only tax, no person or item exempt. Then give the American people right to directly decide what they are willing to buy threw government (bypass congress). In 4 years America will reduce the cost of government by 35 to 50% and increase their own purchasing power by 10 to 15%. The first thing the America people will do is remove government welfare for business and the elite. Business will have to create services and goods for the consumer, not the government.

 

The federal  reserve must come up with an accurate and honest CPI and keep the inflation rate between a deflationary 1% and 0 inflation. No more inflation!! Start paying off the federal debt. If the world can get real interest on their money, the worlds money would move to America.

 

These two changes alone would move business, jobs and money to America in a very big way. Unemployment would decrease, real money would be invested and Americas standard of living would rise dramatically.

Apr 30, 2013 10:38AM
avatar
Jimmy, just what are you smoking? Hit a bottom, they have yet to truly slide.
Apr 30, 2013 10:03AM
avatar
perhaps the whole world is following japan into a decade or 2 slump season?  at least for the common man
avatar

How can Europe be bottoming out when each month this is the same headline you read :

 

Eurozone unemployment at record high

It's only going to get worse and worse there is no going back and no going forward for Europe

 

just a slowly accelerating fall into the economic dust bin of history.

 

Our younger children will wonder why Europe was thought to be so powerful a century ago.

Apr 30, 2013 12:13PM
avatar

ABS;

 

Good point!

 

If you consume more than you produce or if you aspire to consume more than you produce, no matter how warm & wonderful you may be, you are contributing to the problem.

Apr 30, 2013 11:25AM
avatar
Ya I wouldn't touch Europe with a 10 foot pole, hit bottom?  Crammer you have a very selective view of history and the world if you think this is anywhere near bottom.  The only thing I care about is how far will they drag the rest of the world down with them?  The market might be ignoring it for the time being but that doesn't mean it's not there.  This is one of many reasons I began at the start of April selling equities and buying into safer investments like bonds.  I will eventually have about 40% "safer" investments.  Even the equities I own will be 25% dividend stocks and are spread out in multiple hemispheres.  
Apr 30, 2013 1:56PM
avatar
I seem to recall hearing the headline "cramer and bottom hitting in europe" before but I think it was in a different context and abs was involved .....

Btw what happened to the 3rd member of the Axis of Stupid triumvirate - we still have dlh and abs but no mirage goo ..... 

Btw abs and dlh I hear they are casting for a new movie dumb, dumber and teabaggers ...maybe you guys should audition.

Keep up the good work in annoying these wankers mr President !
avatar

Let's see Europe can not generate enough revenue to pay it's debt.

 

Europe can not cut back on borrowing money as that has proved to led to more unemployment and even less revenue and social programs that kick in to increase the debt.

 

Pretty much it's this way with Europe -- they can not put on the breaks without the economic engine destroying itself -- they can not push on the gas pedal to go faster as the brick wall ahead of them is approaching faster and faster.

 

They are in a catch 22 with no way out.

 

So they have decided merely to print more moneys. Like the US and Japan.

 

However they have not realized yet that the APEC and BRICS countries are no longer trading in Euros or Dollars or Yen but Chinese RMB.

 

China has no choice but to redo the western economic model as they have a huge problem that western economic theories can not fix. They have built over 120 million apartment/housing units for about 10,000 yuan each in real costs yet they have allowed the bidding wars to push the prices up to like 2,000,000 yuan each unit.

 

Yet the 500 million people who need to move into these units can only afford 1,000 yuan.

Pretty much the Chinese government has allowed about 15 million Chinese to become millionaires and about 10,000 to become billionaires without thinking about the poor in their country.

 

Pretty much China is going to have to take back the wealth it has given a few choosen ones in China and hand it out to the poor or else they will be facing another revolution they can not win.

 

The western economic system of concentrating wealth in 1 percent of the population has been a complete and total failure.

Apr 30, 2013 11:07AM
avatar
If Cramer is saying its hit bottom, its no where close.  THeir stock markets are at 5 year highs but thats the "bottom", idiocy.  Europe is going to get alot worse before it gets any better.
Apr 30, 2013 10:41AM
avatar

"WASHINGTON (AP) - Americans' confidence in the economy jumped this month, helped by a better outlook for the job market and expectations for higher pay."

 

What? Basic Right violations are through-the-roof. There's a massive blockade fueled by online job postings. Younger people who can actually get jobs are being terminated at 88 days. This "board" is bogus and needs to be shut down immediately. What STEERAGE.

Apr 30, 2013 1:11PM
avatar

HEADLINE: AMERICA STRUGGLES TO SURVIVE AS ANTI-AMERICAN STOCK GRUBBERS TAKE PROFITS FROM EVERY QE BERNANKE PUTS INTO THEM.

 

Film at 11.

Apr 30, 2013 1:09PM
avatar

Did I mention the other day...

That I saw a little bald guy, with a graying beard and a big red nose; Looked like a ping-pong ball.?

Standing at the edge of a cliff, with a rabbit under one arm and a gerbil under the other..

He was yelling "these aren't Lemmings, they are not Lemmings." .."I am not BoBo..."

 

Last thing I saw, was the rabbit bit him on the arm, gerbil broke free; Along with the bunny..

The guy with the plastic nose, went over the side yelling about Lemmings and BoBo..

What the hell was that ?....And what was going on...???

Apr 30, 2013 3:53PM
avatar
Just waiting for CGT's explaino...when they ring the Bell,,probably check later got work to do...
Apr 30, 2013 3:29PM
avatar

Yup...ICE Cold...Even got a 20' Laptop, won't fit on my little desk...Hardly use it..

But we are in process of Re-arranging a media room; Going to move all this shidt, then I'll have room.

Believe our big TV has got hook ups for UBS, and another 30 some incher, gonna change some stuff here because I like to watch and check, what's going on in the World..Kinda a hobby when I'm not busy....Plus I have a router with different adjuncts haven't used in about 2 months.

 

HOW ABOUT.....That Conoco(COP)...Looking pretty good the last few days...eh.

You guys keep buying them Fords, I appreciate that...I'm a Chebby man, but invest in Ford.

Yes, I was one of,(?) that mentioned them getting Federal monies before all the bailout hits.

 

I'm also gonna catch Fatty out on the road, switch to 4 wheelin' in my old Blazer, kick down that Vortex and flatten his azz with all 4 tires...yuk,yuk,yuk...(stolen from Crazy)..

 

avatar

LYG has been profitable this past quarter.  They were not hit as hard as they thought with the fines for selling insurance that home owners didn't need.   Their share price has gone up 75% this past year. 

 

Apr 30, 2013 9:52PM
avatar
One for the good guys today, we were able to hang in there and ended in the green across the board....Shows again how resilient this market has been lately....Does that mean that the crooks will give up and go away? Hardly, three more days to go this week and better believe it folks, will not be that easy.
Apr 30, 2013 3:15PM
avatar
We've been trying to hang in there all day long. now we are in the last and toughest hour of the day; manipulators started to do their thing...Will be a long hour, better believe that...Always cautiously optimistic...Very cautiously though.....More after the close.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

133
133 rated 1
286
286 rated 2
441
441 rated 3
737
737 rated 4
614
614 rated 5
606
606 rated 6
621
621 rated 7
441
441 rated 8
317
317 rated 9
122
122 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
BBBYBED BATH & BEYOND INC10
TWXTIME WARNER Inc10
COPCONOCOPHILLIPS9
HDHOME DEPOT Inc9
VZVERIZON COMMUNICATIONS9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.