Industrial vs. consumer. Small and medium-sized clients versus behemoths. Costly labor vs. reasonable employees. Autos vs. home and office. The world vs. America.
We keep hearing about these contrasts, with the former being disastrous right now and the latter being halcyon.
Nothing presents the dichotomy better than the reports last night of U.S. Steel (X) and Herman Miller (MLHR) , the best office and home furniture designer on the globe and the maker of the stupendous, still revolutionary Aeron chair.
Last night Herman Miller blew the doors off the fiscal first-quarter numbers, earnings per share of 84 cents when the Street was looking for 78 cents with sharply better-than-expected revenues. The company had 7% year-over-year order growth and a remarkable 160-basis point margin expansion which produced a 35% increase in EPS. North America and retail led the charge. Those of us fortunate enough to own an Aeron -- I got one as a wedding present -- know that these are indestructible as well as health advancing, which is how you can charge $999 on Amazon for an Aeron and get away with it.
U.S. Steel, on the other hand, told you last night it was having a colossal shortfall, guiding for third-quarter EBITDA to come in at $115 million when the Street was looking for $190 million. That's a 35-cent loss.
It's the third steel company to provide a disappointing earnings view in just the last few days, with Nucor (NUE) and Steel Dynamics (STLD) giving you numbers well short of the Street's projections.
U.S. Steel forecasts that things are only getting worse as a host of end markets weaken both here and in Europe and remember that's despite tariffs meant to boost X's bottom line and cause more hiring, not idling.
What a contrast to a tweet that the president posted back in May: "In one year Tariffs have rebuilt our Steel industry -- it is booming! We placed a 25% Tariff on 'dumped' steel from China & other countries and we now have a big and growing industry. We had to save Steel for our defense and auto industries both of which are coming back strong!" He particularly singled out U.S. Steel, tweeting: "Steel is coming back fast. U.S. Steel is adding great capacity also."
Now it is absolutely true that the Chinese have been using transshipments to move its steel, not directly exporting it to the U.S. but dumping it through other countries. The tariffs, I believe, are working.
But the flipside is true, too, there's a lot less business so it doesn't matter who makes it where, pricing has collapsed. The tariffs, among other pressures, have slowed industrial growth and steel's in crosshairs.
It's true that none of the worries about price inflation came true. It is the opposite: raw materials are coming down, no wonder Herman Miller can have margin expansion.
But you can see how the president would be angry at the Fed even after yesterday's quarter-point cut. The president needs the U.S. industrial economy to get stronger lest he have more firings than hirings, more furloughs and fewer plants being built to take advantage of our natural resources.
In the end, we are seeing the worst-case play out: global growth is being hindered by our trade war. But we are also seeing a renaissance of small and medium-sized businesses, where the real hiring and job creation really comes from.
Would U.S. Steel be better off with no tariffs? I think that's the wrong question. The world would be better if the Chinese played fair and agreed to the president's wishes. The only way, I believe, to get them to do business without destroying our industry is to lash them, have them feel the pain. Unfortunately, with steel it isn't working, at least for U.S. Steel. You have to wonder if this company can outlast the trade war.
It's backfiring even as it could ultimately succeed. That's why tariffs can be so punitive for those intended to be helped.
It's a sober lesson, one that's lost on everyone, except the U.S. steel worker who might end up losing his job as we try to win the war of trade with an actor who refuses to relent and do the right thing.
