Manufacturers' profit up
(Reuters) - Three major manufacturers reported better-than-expected quarterly earnings as cost cuts offset somewhat lackluster revenue, and they stuck to their forecasts for this year despite slowing growth in China, which until recently had been a bright spot for the economy.
Revenue at both United Technologies Corp (UTX.N) and Rockwell Automation Inc (ROK.N) slightly missed Wall Street forecasts, a sign of deteriorating demand for their products.
Textron Inc's (TXT.N) results easily topped analysts' estimates, and the company forecast 11 percent revenue growth for 2012, driven by strength at its Cessna corporate jet and Bell helicopter units.
Shares of Textron surged as much as 16 percent to their highest level since July.
United Tech said slowing Chinese elevator orders and a sharper-than-expected decline in demand in North America for air conditioning equipment had caused revenue to grow just 0.6 percent to $14.97 billion, $100 million short of forecasts, according to Thomson Reuters I/B/E/S.
"Overall, it was a very slow-growth fourth quarter," Chief Financial Officer Greg Hayes said in an interview.
Likewise, Rockwell Automation recorded flat sales in Asia, factoring out exchange-rate fluctuations, as a tightening of credit in China caused Chinese-owned companies to scale back their spending on factory management systems.
Rockwell's total sales rose 7.9 percent to $1.47 billion, below the $1.51 billion analysts had forecast. Europe was a bright spot, up 13 percent excluding currency fluctuations.
Chief Executive Officer Keith Nosbusch said that reflected strong demand for European-made machinery, which is exported to factories in Asia, the United States and elsewhere around the world.
"We are worried about Europe, we're worried about the sovereign debt issues and the continued issues of not creating certainty for business investment to occur," Nosbusch said in an interview. "Having said that, we still had a good quarter in Europe."
Cost controls helped both companies top Wall Street earnings estimates, but analysts said the weakening revenue growth was a sign that the global economy could take a toll on industrial demand this year.
"One thing it does show is that what looked like conservative guidance back in December may not be so conservative," said capital goods analyst Matt Collins of Edward Jones in St. Louis. "2012 is going to be a tough year."
Over the past week, Germany's Siemens AG (SIEGn.DE) posted a sharper-than-expected drop in operating profit, and General Electric Co (GE.N) reported a steeper revenue decline than Wall Street had anticipated.
United Tech, the world's largest maker of elevators and air conditioners, reiterated the 2012 profit target it had issued in December, which calls for growth of 6 percent to 9 percent excluding the costs of its largest-ever acquisition, a $16.5 billion pending takeover of aircraft components maker Goodrich Corp GR.N.
Rockwell, a maker of factory automation systems whose fiscal year ends in September, reiterated its forecast of 5 percent to 13 percent profit growth this year.
TEXTRON GOLF WRITEDOWN
Textron reported a 7-cent-per-share net loss for the fourth quarter after taking a number of charges, including 41 cents per share to write down the value of its golf mortgage portfolio.
That was a legacy of the company's prior efforts to diversify its finance arm into businesses other than providing loans to buyers of Textron-made jets, helicopters and other equipment.
The company now accounts for its golf mortgages as a discontinued operation.
"There's not a lot of liquidity going back into the golf mortgage portfolio area," CEO Scott Donnelly said. "Now we're in a position where we can go out and start to market those assets."
He expects to sell the assets in separate transactions over a period of about two years.
Factoring out the charges, Textron posted a profit of 49 cents per share, topping analysts' expectations of 34 cents. Revenue came to $3.25 billion, modestly above forecasts.
The company set an initial 2012 profit target of $1.80 to $2.00 per share from continuing operations, up from $1.31 in 2011. It said revenue would rise about 11 percent to $12.5 billion, helped by strong growth at Cessna and Bell.
Textron shares were up 15.5 percent at $24.95 in afternoon trading on the New York Stock Exchange.
"Although the guidance came in ahead of our estimate ... the operating performance was pretty much in line with our forecasts," RBC Capital Markets analyst Robert Stallard wrote in a note to clients.
EUROPE STILL A DRAG
Emerson Electric Co (EMR.N) and TE Connectivity Ltd (TEL.N) reminded investors about Europe's economic weakness.
Emerson posted a slight improvement in trailing three-month orders. It blamed Europe for lower orders in the company's network power business, which makes uninterruptible power systems and other products. Orders fell in the climate segment, reflecting weak global air conditioning markets.
Emerson noted strong investment by oil and gas producers, however, and said U.S. commercial construction was improving.
TE Connectivity, the company formerly called Tyco Electronics, said industrial markets were weak in Europe and Japan, as it reported disappointing earnings and lowered full-year sales and profit forecasts [ID:nL2E8CP1UE]. Its shares fell 5.3 percent to $33.83.
United Tech shares were up 0.5 percent at $78.16, and Rockwell slid 3.2 percent to $79.15.