UPDATE 2-Lufkin posts Q3 earnings ahead of Street, shares rise

* Q3 EPS $0.34 vs est $0.20

* Q3 sales down 40 pct to $117.7 mln

* Sees sluggish revenue growth in Q4

* Shares hit year-high (Adds conference call details, analyst comments, updates share movement)

By Arundhati Ramanathan

BANGALORE, Oct 14 (Reuters) - Lufkin Industries Inc (LUFK.O) posted a better-than-expected third-quarter profit, helped in part by sequentially better results at its oil field division, and said it expects to ramp up capital spending in the fourth quarter, sending its shares to their highest levels in a year.

Shares of the diversified manufacturer rose as much as 14 percent to hit a high of $63.71, before closing up $6.89 at $62.93 Wednesday on Nasdaq. About 6.5 million shares changed hands, about six times the stock's 10-day moving average volume.

On a conference call with analysts, Chief Executive John Glick said the recent improvements and stabilization in oil prices and the corresponding increase in the number of land drilling rigs at work, may be an early sign of a modest ramp up in capital spending in the fourth quarter.

Capital spending will likely gain pace in the first quarter of next year if crude prices are stable or on the rise, Glick added.

Lufkin now expects capital expenditure, excluding acquisitions, of $40 million to $45 million for 2009, compared with its earlier forecast of $30 million. [ID:nWNAB9065]

For the latest third quarter, the company earned $5 million, or 34 cents a share, compared with $24.8 million, or $1.67 a share, a year ago. Analysts on average were expecting earnings of 20 cents, before items, according to Thomson Reuters I/B/E/S. [ID:nWNAB8827]

"They are excellent results, the stock has progressively gotten better today, I had modelled activity bottoming in the fourth quarter, and it looks like higher oil prices have stabilised it sooner than we thought, said Raymond James analyst Collin Gerry.

Gerry said he is seeing a higher degree of confidence in 2010, which is shaping up to be a solid year.

The company said it has seen a noticeable increase in both oil field and power transmission divisions' contract activities over the last six weeks or so, which is a very positive sign.

"While we are not predicting a vigorous rebound in the near term, we are seeing some initial signs that the worst of this market cycle may be behind us," Glick said.

The company, which completed two acquisition this year, said it will continue to look for acquisitions in both oil field and power transmission segments. (Reporting by Arundhati Ramanathan in Bangalore; Editing by Maju Samuel and Pradeep Kurup)