WRAPUP 3-As profits beat, economy weighs on U.S. industrials

* 3M, Tyco, Danaher, Oshkosh beat forecasts

* Many keep 2010 estimates unchanged

* Many companies with better profits cite cost cuts

* Caution prevails over ‘choppy’ recovery
(Adds Kennametal results, updates shares)

By Nick Zieminski and James B. Kelleher

NEW YORK/CHICAGO, Jan 28 (BestGrowthStock) – Profits at U.S.
industrial companies continued this quarter’s trend of beating
Wall Street expectations, but many kept their 2010 forecasts
unchanged and expressed caution over a choppy economic
recovery, and most industrial shares fell.

“We’re still sailing in some choppy economic waters,” 3M Co
(MMM.N: ) Chief Executive George Buckley said.

3M, the biggest of the companies reporting on Thursday,
beat estimates for the third quarter in a row and raised its
full-year outlook, citing strong demand for all its products,
including healthcare products and coatings for electronic
screens.

The company, which makes everything from adhesives and
abrasives to stethoscopes and insect repellent, said
fourth-quarter net income rose to $935 million, or $1.30 a
share, from $676 million, or 97 cents a share, a year earlier.
Revenue increased 11 percent to $6.1 billion. [ID:nN21236221]

“There’s growing concern that the U.S. economy is maybe
stumbling and since stock prices have factored in hopes of a
more robust rebound, we’re seeing weakness in a lot of
industrial names,” said Adam Fleck, an analyst at Morningstar.

Wayne Titche of AMBS Investments in Grand Rapids, Michigan,
a co-manager of the AHA Diversified Equity Fund, said it is
unclear whether an economic recovery is losing momentum or
whether some of the recovery was illusory in the first place.

“The long-term issues that face the economy haven’t gone
away,” Titche said. “We’ve had doubts about how strong the
recovery will be, and we’ve stuck with market leaders and
companies that don’t have a lot of debt.” He named 3M, Parker
Hannifin (PH.N: ), General Electric (GE.N: ) and FedEx (FDX.N: ).

Tyco International Ltd (TYC.N: ) reported a 10 percent
increase in quarterly net income with improved margins in three
of its five units, including its ADT security services
division, which is set to expand after the $1.9 billion
purchase of a rival.

But while the conglomerate kept its 2010 forecast, Tyco’s
projected earnings range was below consensus estimates. Tyco it
said the forecast did not factor in a significant improvement
in economic growth. [ID:nN28215797]

“The wheels would have to fall off the economy at this
point, I think, for us to be down to the low end of the
guidance range,” CEO Ed Breen told analysts on Tyco’s
conference call.

MUTED RECOVERY

Sentiment about the economy has been improving, even as
hard data gives mixed signals on the recovery.

Orders for long-lasting U.S. manufactured goods rose in
December for the first time in three months, the U.S.
government reported on Thursday, but by less than economists
had forecast. Such orders are a leading indicator of
manufacturing activity. For a chart, click
http://link.reuters.com/tyg46h

A quarterly survey of manufacturing executives found 35
percent believe the economy grew last quarter, up 22 points
from three months ago, according to PricewaterhouseCoopers. But
18 percent said they expected the fourth-quarter GDP report,
due Friday, to show contraction.

Industrial tool maker Kennametal Inc (KMT.N: ) reported
better-than-expected profit and raised its forecast for the
year, but called recovery “slight” after a “severe downturn,”
and said it is hard to predict when a stronger rebound will
begin, or if it will last. Its shares fell 5.6 percent.
[ID:nN28228865]

The recovery is going to be choppy and growth muted, said
Keith Springer, President of Capital Financial Advisory
Services in Sacramento. But inventories continue to decline,
which means industrial companies’ customers will have to
replenish when they see proof of growth.

“What I like that I’m seeing, (manufacturers) cut back on
costs quicker than expected,” Springer said. “These big
behemoth companies laid off quickly, cut costs quickly, and
they have adapted output to meet demand much faster, which will
get us through the recession quickly.”

Many companies with better profits cited cost cuts.

Polaris Industries Inc (PII.N: ), a maker of all-terrain
vehicles, snowmobiles and motorcycles, beat Wall Street
expectations, as deep cost cuts outpaced declines in sales. It
also said it was gaining share in key markets. [ID:nN28198721]

Danaher Corp (DHR.N: ), a maker of dental and medical
technology, specialty tools and other equipment, also cited its
restructuring as it beat estimates. Margins improved in its
professional instruments segment, its biggest business. It also
said its orders were improving. [ID:nN28239749]

Meanwhile, specialty truckmaker Oshkosh Corp (OSK.N: )
reported stronger-than-expected quarterly earnings, driven by
vehicle sales to the military, but sales of equipment used by
builders fell amid continued weakness in real estate.
[ID:nN28228472]

Textron Inc’s (TXT.N: ) loss narrowed, but it set a much
lower-than-expected 2010 profit target, signaling weak demand
for jets would continue to haunt the parent of
Cessna.[ID:nN28229596] Textron slid 6.5 percent to $19.63 in
late trading.

The world’s largest maker of recreational boats, Brunswick
Corp (BC.N: ), reported a wider-than-expected quarterly loss as
the oversupply of recreational boats and discounting continued
to weigh on results. It fell 9.3 percent to $11.12.
[ID:nN28235668]

3M fell 2.2 percent to $80.53, Tyco lost 1 percent to
$36.13, and Danaher lost 2 percent to $72.68, all on the New
York Stock Exchange.

Stock Market Analysis
(Additional reporting by Scott Malone in Boston; Editing by
Tim Dobbyn, Bernard Orr)

WRAPUP 3-As profits beat, economy weighs on U.S. industrials