WRAPUP 3-U.S. manufacturers say demand up after cliff standoff

Wed Jan 23, 2013 11:11am EST

* United Tech confirms 13 pct profit growth forecast
    * Textron sees 2013 earnings up about 12 percent
    * Housing, commercial construction a lift
    * Shares little changed in early trading


    By Scott Malone
    BOSTON, Jan 23 (Reuters) - Top U.S. manufacturers sounded a
confident note about their expectations for 2013 on Wednesday as
fears of the year-end "fiscal cliff" faded into memory.
    Textron Inc laid out an earnings forecast that would
represent growth of about 12 percent, while larger peer United
Technologies Corp reiterated a projection that its
profit would rise about 13 percent.
    Executives at each company said that, after seeing a
year-end pause in ordering as customers worried about a budget
standoff that could have triggered large spending cuts and
higher taxes in the United States, demand is recovering.
    "What we see in the economy in the U.S. is that the rebound
in the housing market is really having a pull-through effect on
the rest of the economy," said Greg Hayes, chief financial
officer of United Tech, in an interview. "Commercial
construction is coming back. We saw particular strength in North
America and Asia, not as much of a story in Europe, as you can
imagine." 
    The U.S. housing slump set the 2007-2009 recession in motion
and a slow recovery in that market has been one important drag
on a long, sluggish recovery. Recent government data have shown
a pickup in demand, with a report last week showing housing
starts surged to a four-year high in December.
    Hartford, Connecticut-based United Tech is the world's
largest maker of elevators and air conditioners and also
produces Pratt & Whitney jet engines and Sikorsky helicopters.
It also noted that airlines' orders for spare parts for jet
engine had risen in the quarter, reflecting higher rates of
travel.
    "The path gets a little easier," said Daniel Holland, equity
analyst at Morningstar, who covers United Tech. "If you look at
all the pieces, a housing recovery here and in China, and an
improving environment for Otis (elevators) in China, they have
decent, positive momentum."
    Meanwhile, Textron said it expects sales of its Cessna
corporate jets to pick up this year, after a year-end drop that
the Providence, Rhode Island-based company blamed on "fiscal
cliff" worries. 
    "We probably have had more order activity than we're used to
seeing at the beginning of January," reflecting orders that had
been delayed during the "fiscal cliff" standoff, said Chief
Executive Scott Donnelly, on a conference call with analysts.
"We'll see a degree of uncertainty in the jet market as
Washington works through its fiscal challenges, but we believe
demand will solidify as those uncertainties are reduced."
    While the White House and Congress averted the crisis that
could have been triggered by allowing the U.S. economy to go
over the "fiscal cliff", an event that economists said would
have sent the nation back into recession, budget battles
continue.
    On Wednesday, U.S. lawmakers are expected to vote to extend
by four months the government's ability to borrow money,
effectively suspending rules that allow the nation to borrow no
more than $16.4 trillion. 
    Both companies also have significant defense businesses, and
face the risk that the U.S. will continue to scale back spending
on weapons, such as United Tech's Black Hawk military
helicopters and Textron's heavy armored vehicles.
 
    
    GROWTH FORECASTS
    United Tech stood by its forecast, first issued last month,
that called for 2013 earnings to rise by about 13 percent to a
range of $5.85 to $6.15 per share, with sales up about 12
percent to a range of $64 billion to $65 billion.
    Textron issued a 2013 forecast that called for profit to
rise by about 12 percent to a range of $2.10 to $2.30 per share,
with revenue up about 6 percent to $12.9 billion.
    The results came a few days after General Electric Co
, the largest U.S. conglomerate, said that it ended 2012
with a record-high order backlog and sounded a confident note on
2013, sending its shares higher on Friday.
    The manufacturing sector has been one of the better
performers this quarter, with 80 percent of the industrial
companies in the Standard & Poor's 500 index topping
analysts' forecasts. That's better than the 68 percent of
companies across the index that have beaten estimates.
    United Tech and Textron shares, each of which had risen
roughly 15 percent over the past six months, outpacing the
broader U.S. market, were little changed in early trading. 
    United Tech rose 70 cents, less than 1 percent, to $88.17
and Textron gained 1.2 percent to $27.40. Both trade on the New
York Stock Exchange.
    Investors will get more news on the sector later this week,
when 3M Co and Honeywell International Inc are
due to report results.
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