Industrials post solid profits, cost cuts key
BOSTON/CHICAGO (Reuters) - Several big U.S. industrial companies reported better-than-expected profit on Wednesday, as last year's hefty cost-cutting programs began to pay off and demand for some heavy equipment showed signs of recovering.
Caterpillar Inc <CAT.N>, the world's largest maker of construction and mining equipment, and Rockwell Automation Inc <ROK.N>, which makes systems that help factories run more smoothly, both posted earnings well ahead of Wall Street's forecasts.
But investors kept a sharp eye on revenue, sending Rockwell shares up as the company reported that sales of its highly profitable computer control systems were better than expected and selling off Caterpillar after its revenue lagged consensus and it set a 2010 profit target below analysts forecasts.
"Some of the cost benefit is definitely flowing into the numbers," said Richard Eastman, senior analyst at Robert W. Baird & Co., who follows Rockwell. "But you also have to credit sales, sales are running a bit ahead of expectations."
United Technologies Corp <UTX.N> and Tyco Electronics Ltd <TEL.N> also reported profit that topped consensus.
Caterpillar updated its outlook for 2010, saying it now expects a profit of $2.50 a share on sales of $35.6 billion to $40.5 billion. Analysts' average earnings forecast is $2.71 a share, according to Thomson Reuters I/B/E/S.
The company also said sales by its dealers were on the rise.
"We are focused on increasing production levels in our plants and with our suppliers," said Chief Executive Jim Owens. He added that the company has begun to recall workers laid off during the downturn, though the 500 employees brought back represent a sliver of the 25,000 jobs the Peoria, Illinois-based company cut.
The solid results continue a trend. Over the past week, General Electric Co <GE.N>, Parker-Hannifin <PH.N> and Eaton Corp <ETN.N> also reported better-than-expected profit.
U.S. SOFT, ASIA PROMISING
While the United States' recovery from its worst recession since the 1930s remains uncertain, manufacturing executives said their prospects in Asia looked stronger.
Milwaukee-based Rockwell, which raised its full-year forecast to $2 to $2.40 per share, up from a prior forecast of $1.25 to $1.75 a share, cited Asia's promise.
"We saw strong growth in emerging Asia," said Keith Nosbusch, Rockwell's CEO.
United Tech CEO Louis Chenevert was similarly bullish on Asian prospects.
"Year over year order rates have remained stable, although at low levels, and we saw increases in some Asian economies, notably China," said the head of the world's largest maker of elevators and air conditioners, who confirmed the company's forecast for full-year earnings of $4.40 to $4.65 per share.
Caterpillar said it expected the world economy would grow more than 3 percent in 2010, led by developing economies like China, which it said would grow more than 10 percent.
But it warned that the United States, the world's largest economy, would grow just 3.5 percent in 2010 -- well below levels seen in past recoveries and that a continued decline in nonresidential building construction, and delays in passing a highway bill, would "likely will cause highway contractors to remain cautious about purchasing equipment."
"They're offering a little more cautious outlook on profitability than some of the more optimistic analysts were hoping for," said Eli Lustgarten, an analyst at Longbow Securities.
Caterpillar shares fell 4 percent to $53.55 in premarket trading, Rockwell's rose 7 percent to $49.50.
The Standard & Poor's capital goods industry index <.GSPIC> has risen about 24 percent over the past six months, twice the 12 percent growth of the broader S&P 500 <.SPX>.
(Additional reporting by Chris Kaufman and Nick Zieminski in New York, editing by Dave Zimmerman)
