Manufacturers say demand up after cliff standoff
Top manufacturers sounded a confident note about their expectations for 2013 on Wednesday as the worries of the year-end "fiscal cliff" standoff in Washington faded into memory.
Textron Inc laid out an earnings forecast that would represent growth of about 12 percent, while larger peer United Technologies Corp reiterated a projection that its profit would rise about 13 percent.
Executives at each company said that, after seeing a year-end pause in ordering as customers worried about a budget standoff that could have triggered large spending cuts and higher taxes in the United States, demand is recovering.
"What we see in the economy in the U.S. is that the rebound in the housing market is really having a pull-through effect on the rest of the economy," said Greg Hayes, chief financial officer of United Tech, in an interview. "Commercial construction is also coming back. We saw particular strength in North America and Asia, not as much of a story in Europe, as you can imagine." [ID:nL1N0AS2TI]
The Hartford, Connecticut-based company is the world's largest maker of elevators and air conditioners and also produces Pratt & Whitney jet engines and Sikorsky helicopters. It also noted that airlines' orders for spare parts for jet engine had risen in the quarter, reflecting higher rates of travel.
Meanwhile, Textron said it expects sales of its Cessna corporate jets to pick up this year, after a year-end drop that the Providence, Rhode Island-based company blamed on "fiscal cliff" worries.
"We're planning on deliveries to be higher than in 2012," said Chief Executive Scott Donnelly, on a conference call with analysts. "We'll see a degree of uncertainty in the jet market as Washington works through its fiscal challenges, but we believe demand will solidify as those uncertainties are reduced."
While the White House and Congress averted the crisis that could have been triggered by allowing the U.S. economy to go over the "fiscal cliff", an event that economists said would have sent the nation back into recession, budget battles continue.
On Wednesday, U.S. lawmakers are expected to vote to extend by four months the government's ability to borrow money, effectively suspending rules that allow the nation to borrow no more than $16.4 trillion.
United Tech stood by its forecast, first issued last month, that called for 2013 earnings to rise by about 13 percent to a range of $5.85 to $6.15 per share, with sales up about 12 percent to a range of $64 billion to $65 billion.
Textron issued a 2013 forecast that called for profit to rise by about 12 percent to a range of $2.10 to $2.30 per share, with revenue up about 6 percent to $12.9 billion.
The results came a few days after General Electric Co , the largest U.S. conglomerate, said that it ended 2012 with a record-high order backlog and sounded a confident note on 2013, sending its shares higher on Friday.
United Tech and Textron shares were little changed in premarket trading.
Investors will get more news on the sector later this week, when 3M Co and Honeywell International Inc are due to report results.
(Reporting By Scott Malone; Editing by Theodore d'Afflisio)