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UPDATE 2-Timken shares drop on lower profit, latest outlook cut

James B. Kelleher
Thursday, 24 Oct 2013 | 11:21 AM ET

* Blames 'slower-than-expected economic recovery'

* Shares fall as much as 11 percent

* Analyst says miss requires 'significant explanation' from management

(Adds analyst and CEO comment, updates stock price)

Oct 24 (Reuters) - Timken Co reported a lower-than-expected quarterly profit on Thursday and cut its full-year outlook yet again, citing a "slower-than-expected economic recovery" that it said had depressed demand for its ball bearings and specialty steel across all markets.

The news sent the company's shares skidding as much as 11 percent on Thursday morning on the New York Stock Exchange.

The Canton, Ohio-based company posted a third-quarter profit of $52.2 million, or 54 cents a share, down from $80.9 million or 83 cents a share in the comparable period last year.

Sales fell 7 percent to $1.1 billion.

Analysts expected the company to report a profit of 88 cents a share, according to Reuters estimates.

Timken said it now expects full-year 2013 sales to be down 13 percent compared with a year before.

It was the latest in a series of cuts in expected revenue.

At the start of this year, Timken said it expected sales to be down 5 percent in 2013. In July, the company revised that outlook and said it expected sales to be down 10 percent this year, in part because of softer-than-expected demand from industrial customers.

As a result of the deteriorating sales outlook, Timken said on Thursday that it now expects to post full-year EPS in the range of $2.70 to $2.90, down from its most recent forecast of $3.30 to $3.60 a share and an original forecast of $3.75 to $4.05 a share.

In a note, Jefferies LLC analyst Stephen Volkmann called the earnings miss "broad and deep" and said it would require "significant explanation" from management during Thursday's conference call to discuss the results.

During the conference call, Timken President and Chief Executive Jim Griffith said the company had badly misjudged the state of the world economy - and warned that weakness experienced by Timken so far this year would "extend well into next year."

Timken blamed 7 cents of the projected full-year earnings cut on anticipated costs related to its separation into two companies.

In May, the company's shareholders approved an activist investor's proposal to split the company into two businesses. A formal plan to separate the two businesses was announced in September and Timken said it expected to complete the tax-free process within 12 months.

Timken shares were down 8.7 percent at $54.90 at midmorning on Thursday, off an earlier low at $53.50.

(Reporting by James B. Kelleher in Chicago; editing by Gerald E. McCormick, Chizu Nomiyama and Matthew Lewis)

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