A common theme emerged Friday as U.S. multinational manufacturers delivered a mixed bag of earnings results: Sales were stung by a robust U.S. dollar, and weaker growth and demand overseas, especially in Western Europe.
Several - including Ingersoll Rand and Parker Hannifin Corp - gave forecasts that disappointed investors. A few, notably General Electric Co and Honeywell International Corp, missed analysts' sales estimates, yet kept their forecasts for the rest of the year.
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All four - with a combined $52 billion of quarterly sales - earned less revenue than Wall Street analysts had expected.
"Revenues keep missing," said Ken Polcari, Managing Director of ICAP Equities in New York. "That is the story that we are hearing across the line."
GE, the largest U.S. conglomerate, said Friday sales at its aviation and healthcare arms dipped 1 percent in the quarter, though analysts noted overall revenue was hurt by a robust dollar, which diminishes the reported value of foreign sales.
Diversified U.S. manufacturer Honeywell International Inc reported a 10 percent rise in quarterly earnings as falling natural gas prices buoyed profit at its UOP chemical arm and offset weakness in Europe.
Some of Friday's results suggested multinationals could be reaching the limit of their ability to boost profit through efforts such as cost cutting, said Keith Goddard, CEO of Capital Advisors.
"We're at the upper bound of where profit margins can go. They're not going to expand further," Goddard said, adding that margins are not likely to collapse, barring another recession.
Heating and cooling systems maker Ingersoll Rand beat profit expectations as it realized some of the benefits of years of restructuring. However, revenue fell short of estimates, and so did its fourth-quarter forecast.
International industrial markets hurt profit at Parker Hannifin, which said the economic picture remained murky and that it was focused on controlling costs. The maker of motion control and hydraulic systems slashed its forecast for the fiscal year that extends to June 2013.
Some of the strongest results were among companies that will soon lose their independence.
U.S. engineering company Shaw Group Inc, which agreed in July to a $3 billion takeover by Chicago Bridge & Iron Co, beat estimates, helped by higher sales in its power business.
Cooper Industries Plc, the electrical products maker that agreed to a takeover by Eaton Corp, reported higher-than-expected profit and sales amid lighting demand in North America and growth in international energy projects.
Cooper's sales in China jumped more than 20 percent in the quarter, raising hopes that the giant Asian economy, a key market for U.S. industrials, may be reviving from a slowdown that has rattled the nerves of investors in economically-sensitive stocks.
Indeed, industrial companies deserve higher valuations, Capital Advisors' Goddard said, noting it's unusual for a growth stock fund to own names like GE, Eaton, GM, FedEx and Swiss-based ABB.
"Coming out of the great recession, industrial companies rationalized their cost bases more deeply than has ever occurred in the post-World War II era," he said. "You can make a case the intrinsic value is higher than it used to be (and that) the price-earnings ratio deserves to be higher than it used to be."
(Additional reporting by Scott Malone in Boston and Ernest Scheyder in New York; Editing by Bernadette Baum)