By Scott Malone
United Tech, the world's largest maker of elevators and air conditioners, reported fourth-quarter earnings that met Wall Street's expectations on Wednesday and stood by its 2009 profit forecast, which allows for earnings to be anywhere from up 5 percent to down 5 percent.
SPX, which makes cooling towers used in electric plants and equipment used in oil and gas production, set a 2009 profit target that allows for a 9 percent to 15 percent decline from its expected 2008 earnings. The forecast was better than Wall Street expected, sending SPX shares up in pre-market trading.
United Tech said it expects to incur $150 million in first-quarter restructuring charges as it moves to aggressively cut costs, while SPX said it expects its 2009 restructuring expenses to come to $65 million.
Neither company said specifically what it would do to cut costs, but companies across the U.S. economy have been slashing jobs in the face of what many fear will be a prolonged recession. On Tuesday, fellow manufacturer Eaton Corp <ETN.N> said it would lay off 5,200 workers.
Both United Tech and SPX generate significant revenue outside the United States and are being hurt by a strengthening U.S. dollar, which makes their goods seem more expensive.
"We expect commercial construction weakness to spread from the U.S. into emerging markets," wrote Citigroup analyst Jeffrey Sprague, in a note to clients. "Otis and Carrier could be exiting 2009 weaker than they enter."
A leading indicator of U.S. nonresidential construction activity rose slightly last month but remains near historic lows amid scarce credit, an architects' trade group said on Wednesday.
UNITED TECH HITS MARK
Hartford, Connecticut-based United Tech's fourth-quarter earnings came to $1.15 billion, or $1.23 per diluted share, up 8 percent from $1.1 billion, or $1.08 per share, a year earlier. The result matched analysts' average forecast of $1.23 per share, according to Reuters Estimates.
Revenue eased about 1.5 percent to $14.5 billion, sapped by the strengthening dollar. Factoring out exchange-rate fluctuations, revenue would have been up 3 percent.
"In this environment, this is about (all) industrial investors can expect and underlines the earnings resilience of this group," wrote Deutsche Bank analyst Nigel Coe, in a note to clients.
The company maintained its 2009 profit forecast of $4.65 to $5.15 per share, ranging from a 5 percent decline to a 5 percent rise from a year earlier.
Orders at Otis elevators fell 14 percent and Carrier commercial heating and cooling systems orders fell 7 percent.
SPX SEES DECLINES
Charlotte, North Carolina-based SPX set a 2009 profit target that allows for up to a 15 percent drop from forecast 2008 earnings, as it expects a slowing global economy to pound down revenue 7 percent to 12 percent.
The manufacturer expects to earn $5.40 to $5.80 per share from continuing operations in 2009, with organic revenue -- which factors out exchange-rate fluctuations and divestitures -- flat to down 5 percent.
Analysts, on average, had looked for 2009 profit of $5.36 per share, down from an expected $6.36 per share in 2008, according to Reuters Estimates. SPX is due to report 2008 results on February 25.
Shares of SPX soared 17 percent to $45.52, while United Tech eased 1.4 percent to $48.65. Both trade on the New York Stock Exchange.
Elsewhere in the sector, shares of General Electric Co <GE.N> touched a fresh 12-year low after two more brokerages said the U.S. conglomerate's top-shelf credit rating may be at risk and warned GE may have to cut its dividend.
Shares of GE, which is due to report quarterly results on Friday, fell 3.6 percent to $12.46 on the NYSE.
(Reporting by Scott Malone; additional reporting by Nick Zieminski in New York; Editing by Derek Caney)