Executives at several top diversified U.S. manufacturers said Thursday they are starting to see signs of the slowing economy taking a toll on business, tempering their outlook for 2008.
That prompted investors to sell off shares of companies including United Technologies,Textron and Danaher , even as all three companies reported quarterly earnings that topped Wall Street's expectations.
Motorcycle maker Harley-Davidsonconfirmed the downturn in the U.S. consumer sector by saying it now expects full-year profit to fall 15 to 20 percent, down from a prior forecast of growth, and disclosing plans to lay off hundreds of workers.
United Tech, which is the world's largest maker of elevators and air conditioners, said it was starting to look for ways to cut costs as it faced a slowing economy in the United States and abroad.
"As we look to the back half of the year, we continue to adjust our operations in anticipation of the uncertain economic environment," said Louis Chenevert, United Tech's chief executive.
In addition to the continued slump of the U.S. housing sector, United Tech noted there were signs of slowing demand in the commercial construction sector -- a much bigger piece of its business and an area that many industrials had been until recently describing as still solid.
"Commercial construction is now looking to be less than strong, and that's where a lot of people have been hanging their hat in terms of growth," said Peter Klein, senior portfolio manager at Fifth Third Asset Management, which manages about $20 billion in assets and holds United Tech shares.
"Most folks are saying, well the first quarter is over, what's the rest of the year look like?" Klein said.
United Tech and Danaher held their full-year outlook flat.
Textron raised its profit forecast by 5 cents per share, citing continued strong demand for corporate jets, even as Chairman and Chief Executive Lewis Campbell told investors the company's expectation is "that the general economy continues to soften." Shares of the world's largest maker of corporate jets fell 3.2 percent to $60.17.
The shares are still up about 29 percent over the past 52 weeks.
In a further sign of manufacturing executives taking a dim view of the future, the trade group Manufacturers Alliance/MAPI's Business Outlook index dipped to 57, down from 64 in December, indicating slower growth expectations.
The index is based on a poll of 68 senior financial executives.
Executives' cautious tone also reflected the sharp sell-off in shares of General Electric last week.
GE shares took their biggest tumble in two decades after the company stunned world markets with an unexpected decline in quarterly profit.
"There's a little bit of economic uncertainty on the horizon, but we are very confident in our guidance and we are going to work to continue to be transparent with you guys as we always have," said Gregory Hayes, United Tech's vice president of accounting and finance on a conference call with analysts.
"This is a culture of no surprises and we're going to endeavor to make sure there are no surprises as we go forward." While Hayes did not mention GE specifically, one analyst suggested he may have had it in mind.
"You can't help but notice what happened with GE last week, obviously," said Matt Collins, capital goods analyst at Edwards Jones in St. Louis. "You are going to be probably more cautious than you otherwise would be."