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U.S. manufacturers can't quite see the light at the end of the tunnel, but are growing more confident that they are not going to run off the rails.
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CNBC.com |
Honeywell International [HON
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] and Ingersoll-Rand [IR
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], which make products ranging from control systems for large buildings to air conditioners, told investors Friday that after a year of sharp declines in earnings and sales, they expect better conditions in 2010.
Honeywell, the world's biggest maker of cockpit electronics, expects "flattish" sales next year, Chief Financial Offieer Dave Anderson said.
"What we're seeing now is that we're stabilizing at these new low rates. In other words, the spend levels are way down but they're stable sequentially, quarter to quarter," Anderson said in an interview.
"The comparisons to prior-year same period are important, but they're becoming less important than the new run rate that's being established. And the fact that the new run rate is stable is very, very encouraging," he said.
The Morris Township, New Jersey-based company said it expected to further reduce expenses next year, but offered no profit forecast, saying it planned to provide that in December.
But the combination of flat revenue and lower expenses implies "modest profit improvements," noted Citigroup analyst Jeffrey Sprague.
Ingersoll, however, went further and set an initial 2010 profit forecast. It said it expected operating earnings of $2 to $2.40 per share in 2010, above Wall Street estimates of $1.98 a share. That forecast would mark sharp growth from the $1.58 per share profit analysts expect this year.
"We are confident we can deliver substantial improvements in earnings versus 2009," Chief Executive Herb Henkel said on the company's earnings conference call.
The maker of heating and cooling systems for homes, businesses and transport is counting on cost-cutting to drive the vast bulk of its profit growth. It forecast 2010 revenue up just $200 million from 2009, when analysts on average look for revenue of $13.33 billion, according to Thomson Reuters I/B/E/S.
Even that growth, Henkel said, would be "due solely to the absence of the significant destocking we saw customers undertake in the first half of 2009."
Both companies, whose equipment is used in buildings that have already been built, were far more conservative in their outlooks than Caterpillar [CAT
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], whose earth-moving vehicles are often the first gear on a new construction site.
That Peoria, Illinois-based company on Tuesday said it looks for 2010 sales to rise 10 percent to 25 percent.
With the U.S. economy showing tentative signs of recovering from the worst downturn it has faced since the Great Depression of the 1930s, many companies have held back from giving 2010 forecasts.
3M [MMM
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], which makes products ranging from films used in flat-panel televisions to masks that can block the H1N1 flu virus, was among the companies holding back.
"I don't think forecasting is going to get much easier any time soon," 3M CEO George Buckley told investors on Wednesday. "I hope you'll bear with us as we try to identify the underlying trends and patterns that will help us get better insight into where the world economy is going."
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Data is a real-time snapshot *Data is delayed at least 15 minutes