Diversified U.S. manufacturer Honeywell International Inc posted a 15 percent profit drop that was far less severe than analysts had forecast, saying that cost-cutting had protected its margins.

The world's biggest maker of cockpit electronics on Friday held its earnings target for the rest of the year steady, despite topping Wall Street's third-quarter estimates by 8 cents per share. It said it expects to see sales level off next year.

Demand for its products remained anemic, with revenue down 17 percent, as airlines held off on buying spare parts for their aircraft and big corporate customers stood back from major new capital projects that use Honeywell's automation equipment.

We do expect to see top-line declines moderating as we move into the fourth quarter, Chief Financial Officer Dave Anderson told investors on a conference call. We're obviously continuing to plan on the basis of tough economic conditions.

Its shares were off a penny at $38.52 in early trading on the New York Stock Exchange.

Honeywell reported third-quarter profit of $608 million, or 80 cents per share, compared with $719 million, or 97 cents per share, a year earlier. That came in well above the 72 cents per share analysts had anticipated, according to Thomson Reuters I/B/E/S.

Revenue fell 17 percent to $7.7 billion, below Wall Street's $7.88 billion forecast.

Results were better than our expectations, with sales coming in at the low end of guidance but solid margin performance giving an operational beat, wrote J.P. Morgan analyst Stephen Tusa, in a note to clients.

Honeywell held its full-year profit target steady at $2.85 per share, above the $2.78 per share consensus.

Across the industrial sector, big manufacturers have cut costs aggressively this year, allowing companies including United Technologies Corp and Ingersoll-Rand Co to top analysts' profit forecasts despite light revenue.

Morris Township, New Jersey-based Honeywell has faced declining demand for its thermostats and other control systems as commercial construction has slowed around the world. Its aviation unit has also been hit by declining air travel.

Honeywell has twice this year cut its profit forecast, first in April and again in July. As of July it expected to earn $2.85 per share for the year, well below its December forecast of $3.20 to $3.55 per share.

Much of corporate America revised its earnings targets in the first half of 2009, as it scrambled to keep up with a downturn that was faster and more severe than many executives had anticipated.

Honeywell's competitors include United Tech in aerospace and building control systems, Goodrich Corp in aviation and DuPont Co in specialty materials.

So far this year, Honeywell shares are up about 13 percent, lagging the 14 percent rise of the Standard & Poor's capital goods industry index <.GSPIC>.

(Reporting by Scott Malone; Editing by Derek Caney)