Among the biggest losers in Thursday’s early trading are Actuant (NYSE: ATU), Gammon Gold (NYSE: GRS) and DryShips (Nasdaq: DRYS).

A Proxy for an Industrial Rebound

If a company delivers a positive earnings surprise every quarter, is it sill a surprise when they do it again? Actuant (NYSE: ATU), which makes a wide range of hydraulic and mechanical devices used in a host of industrial applications, just topped profit estimates by 18%. The company also topped estimates by at least that much in each of the last two quarters as well, so investors are shrugging off the results, pushing shares down -6% in Thursday trading.

But it’s hard to deny the impressive +17% rebound in sales. This is unequivocally good news for investors involved with any industrial stocks, as it points to a robust rebound for American manufacturers. Unless the incipient economic slowdown in Europe starts to crimp U.S. exports, investors can expect further gains ahead for this sector, as this upturn is no longer about inventory replenishment, but instead is about actual end-user demand.

Action to Take –> Industrial stocks never garner a high multiple due to the cyclical nature of their business. Even though fiscal 2011 EPS estimates may rise from the current $1.30 to about $1.50, shares are fairly valued at about 12 to 13 times that forecast. Actuant exceeded $1.66 a share in earnings only once in the last decade, so it’s unreasonable to expect profits to spike much higher beyond 2011. Instead, view this earnings report as a validation for the entire industrial sector.

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#-ad_banner-#A Lose-Lose Fight

“Hey man, they’re shuttin’ down El Cubo.” That’s the likely sentiment being shared in Guanajuato, Mexico, as Gammon Gold’s (NYSE: GRS) management decided to close that gold mine rather than acquiesce to labor’s demands. The timing is pretty lousy — Gammon had just recovered from a disappointing mine deal in the Chihuahua region of Mexico. Analysts had recently turned bullish again on the company’s prospects that both mines would produce a high level of output in 2010. Shares are down -10% in Thursday trading and may fall even further if this decision proves permanent. But there’s a good chance that management and labor will step back from the brink, as this is a lose/lose outcome for both parties. Then again, management and the union have been leveling some fairly serious accusations at each other. Perhaps a sale to another mining firm will be the endgame.

Action to Take –> If shares fall further and signs emerge that this impasse can be resolved, then shares will post a nice rebound, though that window won’t last for long. It’s certainly worth monitoring for a possible quick gain.

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DryShips’ Declining Fortunes

In a bid to boost a stock, management can sometimes be too clever by half. Executives at DryShips (Nasdaq: DRYS) weren’t content to simply operate a fleet of ships that carry dry goods such as commodities. They bet the company’s capital on a new unrelated venture to build a fleet of oil-drilling rigs that would give it exposure to a second industry. No matter that the company needs another $1 billion to complete construction of the four rigs — it assuaged investors’ concerns by noting that this second division would make for a very appealing IPO, removing that financing burden.

And then the Gulf oil spill happened. A sudden drilling slowdown in that market has freed up many rigs to move elsewhere in the world, and that’s pushing down the lease rates that rigs can garner, so the prospects for an IPO just got pushed out into 2011. As a result, DryShips can wait it out and hope for a demand rebound in 2011 or sell its partially built rigs at a loss now.

Action to Take –> Adding insult, the core dry bulk shipping division isn’t looking so hot right now either. If and when both of these divisions are operating on a healthier basis, analysts think the company will be valued at more than $10 a share. But right now, the stock is slumping another -6% to around $4. This is a high-risk/high-reward scenario, and management won’t be so foolish as to allow the unfunded oil rig division to drag the whole company into bankruptcy. How they navigate out of this morass will determine when shares can finally start to gain some respect.