CORRECTED - UPDATE 3-American Standard profit up, but outlook cut

Thu Oct 18, 2007 5:41pm EDT

(Corrects stock performance in last paragraph to make clear that shares have risen, not fallen, this year)

ATLANTA Oct 18 (Reuters) - Heating and cooling systems maker American Standard Cos ASD.N reported a 5 percent increase in quarterly operating profit on Thursday as commercial demand for air conditioning offset weaker residential sales.

But the results fell short of analysts' estimates and the company cut its forecast for air conditioning results for the full year, sending its shares lower.

American Standard, which is separating into three businesses, reported third-quarter profit from continuing operations of $129.2 million, or 63 cents a share, compared with $123.1 million, or 60 cents a share, a year earlier.

The earnings exclude a loss from discontinued operations of $67.3 million, or 34 cents a share, reflecting results from the bath and kitchen business that is being sold and a vehicle-controls unit that has been spun off.

Adjusted for operational consolidation expenses and certain tax items, income from continuing operations was 65 cents a share, American Standard said. On that basis, analysts, on average, expected 69 cents a share, according to Reuters Estimates.

Net income was $61.9 million, down from $150.9 million a year earlier.

Sales from continuing operations rose 7.7 percent to $1.98 billion.

American Standard, which plans to change its name to Trane, its flagship heating and air conditioning brand, later this year, said strength in commercial air conditioning helped compensate for residential sales that have been hurt by the weak U.S. housing market.

The Piscataway, New Jersey-based company said it expects full-year Trane segment income to be $35 million lower than its July estimate, which equates to about 12 cents a share.

It forecast full-year earnings from continuing operations of $1.89 to $1.94 per share. On an adjusted basis, it expects to earn between $1.90 and $1.95 per share.

"Early indications are that commercial markets will be up in '08, with residential flattish," Chief Financial Officer Peter D'Aloia said during a conference call.

American Standard announced plans to separate into three businesses in February. It expects the sale of its bath unit to funds advised by private equity firm Bain Capital Partners LLC to close at the end of this month. In July, the company's truck parts business was spun off into a publicly traded company called WABCO Holdings Inc (WBC.N).

American Standard shares were off 37 cents, or 1 percent, to $33.93 in afternoon New York Stock Exchange trading. The shares have risen 6 percent this year, compared with flat performance in shares of rival Lennox International Inc (LII.N). (Reporting by Karen Jacobs; additional reporting by Aarthi Sivaraman and Sarah Coffey in New York)