Demand Grows in Industrial Markets

Bob Pisani is off; this post was written by CNBC producer Robert Hum.

Stocks are at the highs of the day as the dollar hits session lows. With that, stocks have recovered most of their losses from yesterday (Tuesday). The dollar’s retreat is once again pushing up commodities and commodity stocks late in the morning, with metal and energy stocks are amongst the leadership groups today.

It has been a big day for industrial companies today: 5 key industrial firms reported estimate-beats this morning AND raised their full-year guidance. One thing was clear: demand in industrial markets has continued to grow, but a couple of firms noted that commercial construction remains troublesome.

a) In a very strong report, Eatona) In a very strong report, Eaton beat estimates ($1.60 vs. $1.38 consensus) on higher than expected sales. The maker of hydraulics and electrical components sees end markets growing more than expected this year, with particular strength coming from overseas.

End-markets rebounding faster than expected, particularly overseas. Although demand in industrial markets was strong, the firm notes that growth was offset by weakness in non-residential construction markets.

Nonetheless, 2010 guidance was raised to $5.45-$5.55, far higher than $5.09 consensus

b) United Technologiesb) United Technologiesearnings topped estimates ($1.30 vs. $1.28 consensus), but its top line was a bit light. Orders for its Otis equipment fell 1 percent, but commercial HVAC orders were up 3 percent and orders of Pratt & Whitney equipment soared 35 percent.

Although commercial aerospace markets have rebounded, just like Eaton, UTX CEO Louis Chenevert cautions that “commercial construction markets remain weak."

Guidance for the full year was raised to $4.70, but that still disappoints the Street which has been expecting earnings $4.72. That outlook also implies very light Q4 earnings of $1.27 vs. $1.32 consensus.

c) Boeingc) Boeingreported stronger-than-expected Q3 earnings ($1.12 vs. $1.06 consensus) as the Dow component reported a 10 percent rise in deliveries of its commercial aircraft. Revenues in that unit rose 11 percent, which was offset by a 6 percent decline in defense revenues.

Guidance for the full year was increased to $3.80-$4.00, inline with expectations for $3.95. The company also still expects deliveries of its 787 Dreamliner aircraft to commence in first quarter of next year.

d) Stanley Black & Deckerd) Stanley Black & Deckerbeat estimates ($0.97 vs. $0.90 consensus) as revenues grew more than expected, buoyed by strong emerging market growth. Demand of tools improved as both volumes and organic sales increased nicely. Sales of industrial products were very strong too – up 23 percent on a 26 percent rise in volumes!

The toolmaker raised its full-year earnings outlook to $3.60-$3.70 vs. $3.59 consensus.

e) Textrone) Textronearnings topped estimates ($0.13 vs. $0.08 consensus). Top line growth was light on lower sales of its Cessna business aircraft. However, helping the industrial was increased demand for its Bell helicopters.

The company also boosted guidance to $0.70-$0.75 vs. $0.46 consensus.


a) Airlines Soaring Back to Profitability!

Great news out of the airline industry today as both US Airways and Delta Air Lines reported profits in their latest quarter. Shareholders have reason to celebrate…not only were the companies profitable (a stark contrast to last year’s losses)…their earnings handily BEAT estimates. In fact, US Airways said it had record profits for a third quarter!

Why the strength? Business travel continued to push up traffic, and prices continued to rise (revenues per available seat mile: US Airways up 15 percent, Delta up 16 percent) even though capacity increased.

The key question down the road for airlines: can the current strong pricing levels continue even as they boost capacity? Delta said it expects to increase capacity by 5 percent to 7 percent in the current quarter.

On today’s news, the NYSE Arca Airline Index (.XAL) hits another new 3-year high.

b) Regional banks are mostly lower after Comerica b) Regional banks are mostly lower and Marshall & Illsley missed estimates. Although both banks saw lower credit loss provisions, their net interest margin fell from the prior quarter. Marshall & Ilsley reported higher net charge-offs while Comerica saw higher non-performing loans.

Comerica CEO also noted that “in this sluggish and still uncertain economic environment” customers have remained cautious — as seen by “weak load demand and continued strong core-deposit levels.”

c) The ripple effect from low market volatility and trading volumes this summer: Morgan Stanley c) The ripple effect from low market volatility and trading volumes falls 4 percent after reporting a Q3 loss that was weighed down by weakness at its trading unit. Lower trading results hurt its fixed income sales and trading operations (revenues down 58 percent!) while equity sales and trading revenues fell a steep 23 percent “primarily reflecting lower results in the cash and derivatives businesses driven by reduced levels of both client activity and volatility.”

d) Hertzd) Hertz is up 2 percent after raising full-year guidance and sees Q3 earnings coming in ahead of expectations ($0.40 vs. $0.35 consensus). The car rental agency has seen better demand and higher prices in the U.S. and Europe. Also helping its bottom line: lower fleet costs and effective cost controls.

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