Tags: US | Manufacturing | Profits | Surge | Emerging | Markets

US Manufacturing Profits Surge in Emerging Markets

Wednesday, 20 Jul 2011 12:49 PM

Strong demand from emerging markets is driving profit growth for U.S. manufacturers this year, but executives do not expect that to be much of a lift for the sluggish U.S. economy.

In fact, a top executive at United Technologies attributed the 18.9 percent rise in profit at the world's largest maker of elevators and air conditioners partly to the company's ability to hold the line on hiring.

"The results are driven by the fact that we've driven all this cost out.

Sales have come back, but people have not," said Greg Hayes, chief financial officer at the Hartford, Connecticut-based company.

"It's the structural cost reductions that we have done over the past few years that have allowed us to see strong bottom-line results." While the company is hiring some engineers in the United States, it is doing most of its hiring right now in emerging markets where demand for its products is growing.

"Until you see a big resurgence in consumer spending in the United States, I don't think you're going to see a big improvement in the employment picture," Hayes said in an interview.

Stubbornly high unemployment — which has held between 9 and 10 percent for most of the past two years — stands as one of the biggest problems facing the U.S. economy right now and is shaping up to be a key issue in next year's presidential election.

Big companies like United Tech and Textron , which also reported better-than-expected profit Wednesday, have turned more of their focus overseas to markets where demand is growing, investors said.

"Domestic uncertainty is not holding back Carrier and Otis segments internationally," said Tim Hoyle, the director of research at Haverford Quality Investing, referring to United Tech's air-conditioning and elevator units.

"Growth in emerging markets' airlines (helps) Pratt & Whitney," added Hoyle, whose Radnor, Pennsylvania-based company manages more than $6 billion in assets and holds United Tech shares.

United Tech posted earnings that came in 4 cents per share ahead of analysts' forecasts, according to Thomson Reuters and raised its full-year forecast for the third time since December.

TE Connectivity Ltd, a U.S. maker of electronic connectors previously known as Tyco Electronics, also posted better-than-expected results, saying that telecommunications companies in Australia, China and Europe are making big investments in broadband networks outside the United States, driving demand for its products.

Big Boost For Aviation Sector

Makers of aircraft, engines and aviation components got a big boost Wednesday when No. 3 U.S. airline American Airlines, owned by AMR unveiled an order for at least 460 narrowbody jets from Boeing Co and Airbus running from 2013 through 2022.

That news could provide a lift for companies including United Tech, as well as General Electric and Honeywell International , which make aviation components and are due to report results Friday.

Demand for corporate jets, which has been slow to recover since its precipitous drop during the financial crisis, is starting to show signs of turning, said the head of Textron, which is the world's largest maker of business jets.

"We expect a significant pick-up in demand in the second half of the year, similar to what we saw last year," said Scott Donnelly, chief executive of Textron, which also topped analysts' forecasts but held its full-year forecast steady.

Textron shares were up 6 percent at $23.45 and United Tech shares were down 2 percent at $87.00 Wednesday morning on the New York Stock Exchange.

© 2017 Thomson/Reuters. All rights reserved.

   
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Strong demand from emerging markets is driving profit growth for U.S. manufacturers this year, but executives do not expect that to be much of a lift for the sluggish U.S. economy. In fact, a top executive at United Technologies attributed the 18.9 percent rise in profit...
US,Manufacturing,Profits,Surge,Emerging,Markets
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2011-49-20
Wednesday, 20 Jul 2011 12:49 PM
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