NEW YORK | Thu Apr 21, 2011 10:03am EDT
NEW YORK (Reuters) - Strong business spending drove another crop of earnings beats at large multinational manufacturers, many of which raised 2011 earnings forecasts, but new evidence of a financial toll from Japan's earthquake tempered some of the optimism.
General Electric (GE.N) led Thursday's earnings parade with an 80 percent surge in first-quarter profit, blowing past Wall Street forecasts. It also raised its dividend for the third time since July.
Other companies, albeit smaller than GE, also gained from rebounding capital spending in both developed and emerging economies. Those that fit the beat-and-raise pattern included Danaher Corp (DHR.N), Dover Corp (DOV.N) and Honeywell International (HON.N), which reported late on Wednesday.
"This week we've seen very strong results out of industrial companies, reflecting both a return to manufacturing and also very strong capital investments," said Morningstar analyst Daniel Holland.
Thomas & Betts (TNB.N) and Ingersoll-Rand (IR.N) kept their full-year forecasts intact, while TE Connectivity (TEL.N) cut its outlook because of disruptions from last month's earthquake in Japan.
The build-out of infrastructure in countries like India and China has benefited companies that sell capital equipment, such as farming or construction machinery or factory systems used to produce energy and chemicals. They have also gained from increased investment by the energy sector amid $110-per-barrel oil prices.
Although high raw material prices can hurt profitability, they can also be a boon as food and energy producers spend more on equipment and services. And since many U.S.-based manufacturers generate the bulk of their sales outside their home market, a weaker dollar has also supported results.
The Standard & Poor's capital goods index .GSPIC was nearly down 0.1 percent in early trading, while the S&P 500 stock index .SPX gained nearly 0.4 percent.
Expectations were high coming into the quarter, with investors saying companies would have to beat by wide margins to move their stocks up.
EARNINGS BEATS
Danaher, a maker of test and measurement equipment and medical technology, reported a higher-than-expected quarterly profit on Thursday and raised its full-year forecast, citing growth in Brazil and China.
Profit also beat at Hubbell (HUBb.N), which makes electrical products used in construction, and the company said it expected its core housing and nonresidential construction markets to return to growth next year.
Industrial conglomerate Dover, whose businesses range from food packaging equipment and garbage trucks to microphones for consumer electronics, raised its earnings outlook from continuing operations, citing a strong energy market.
And Honeywell posted a higher-than-expected quarterly profit late on Wednesday and raised its full-year sales and earnings forecast. Sales at its automation and building controls business, its biggest by revenue, rose 17 percent to $3.7 billion, helped by strong industrial demand and a weaker U.S. dollar.
A Honeywell specialty materials business that serves the oil and gas industry had "an absolute blowout" quarter, said analyst Jeff Sprague of Vertical Research Partners.
Ingersoll-Rand's profit from continuing operations beat Wall Street estimates on strength at its climate and industrial businesses. But earnings slumped at its residential solutions unit, which makes locks and air conditioners, amid higher input costs and a still-weak U.S. housing market.
The company said it would sell its Hussmann unit that makes refrigerated display cases used in grocery stores. It is in discussions with a number of potential purchasers of the unit, whose 2010 sales totaled $800 million.
TE Connectivity, the former Tyco Electronics, reported a quarterly profit slightly below analysts' estimates and warned that last month's earthquake in Japan would hurt results in the current quarter.
TE said its 2,000 employees in Japan were safe, but the March earthquake, tsunami and subsequent nuclear crisis were disrupting customers' operations.
Farm equipment maker CNH Global N.V. (CNH.N) maintained its 10 percent revenue growth outlook for the full year, but said the Japan disaster would hit production of its construction equipment over the next two quarters.
On Wednesday, top U.S. manufacturers like Eaton Corp (ETN.N) and United Technologies Corp (UTX.N), reported stronger-than-expected results and raised their full-year earnings forecasts, saying that they were becoming more confident in the economy's direction.
(Additional reporting by Scott Malone in Boston, Karen Jacobs in Atlanta, and Bijoy Koyitty in Bangalore; Editing by Lisa Von Ahn)
{ 0 comments... read them below or add one }
Post a Comment