The executives who run big U.S. industrial companies are cautiously optimistic about the future but, so far, their optimism does not extend very far.

Few are willing to predict stronger demand for their products in 2010, limiting themselves to discussing stabilizing -- rather than improving -- sales trends.

This earnings season, many companies beat Wall Street earnings forecasts, helped by cost cuts, but often reported sales that fell short expectations, noted analyst Guaylon Arnic of Profit Investment Management, which owns a number of industrial names, including Danaher Corp.

They're able to beat on the bottom line but demand is still significantly below 2008, Arnic said. Management teams for the most part have said sales have stabilized, but nobody says (they're going up).

Industrial conglomerate Danaher reported better-than-expected third-quarter profit and sales and said it expected to grow revenues sequentially in the quarter now under way. It called the economy stabilizing yet still challenging.

Third-quarter net earnings fell 5.5 percent to $351 million, or $1.05 per share, from $372 million, or $1.11 per share, a year earlier. Before items, earnings were 89 cents per share, 3 cents better than expected, according to Thomson Reuters I/B/E/S.

'SURPRISINGLY PLEASANT'

3M Co. noted a sequential sales improvement and said demand declines appear to have bottomed in many industries.

I confess that the rate of sequential growth is surprisingly pleasant, 3M CEO George Buckley said on a conference call.

The company, which makes products ranging from Scotch tape to optical films for liquid crystal display televisions, reported third-quarter net income of $957 million, or $1.35 a share, down from $991 million, or $1.41 a share last year.

Revenue fell 5.6 percent to $6.2 billion. Gains in sales of display and graphics products, and health-care revenues, helped offset declines in consumer and office products.

The company raised its 2009 earnings forecast.

We all know the hardest time to forecast sales accurately is at turning points in demand, Buckley said. I don't think forecasting will get much easier any time soon.

Buckley said any real recovery would stem from increased aggregate consumer demand. He said that so far, despite hundreds of billions of dollars of stimulus spending by governments worldwide, consumers remained cautious in most markets.

JPMorgan analyst Stephen Tusa noted 3M raised its 2009 forecast by more than its third-quarter beat, suggesting trends are sustainable near term, but said short-interest in the stock remains stubbornly high as investors bet against the company.

Further insight into the economy came from the transport sector.

The No. 1 U.S. railroad, Union Pacific Corp said a year-long drop in freight volumes tied to the recession appears to have stabilized, although a quick economic recovery was unlikely. Volumes seem to have stabilized at very low levels,

CEO Jim Young said.

Trucking and logistics company Ryder System Inc said it expects soft demand for freight shipments to continue to weigh on its results, as the global economic slump weighs on demand for rental and leased vehicles. Ryder posted a 66 percent slump in net quarterly profit.

Both Ryder and Union Pacific shares fell.

MURKY 2010

Some companies reliant on global trade are sounding more upbeat.

ProLogis
, a builder and owner of warehouses and distribution facilities, said improving global economies should boost demand in 2010.

Industrial property market fundamentals are firming up, ProLogis Chief Executive Walter Rakowich said.

Electrical products and tool maker Cooper Industries Ltd reported a 41 percent drop in quarterly profit, still beating expectations, as cost cuts supported profit margins, and said demand was improving for maintenance and repair products.

Overall, the impression from this week's earnings reports was that prospects for 2010 were still unclear with less than three months to go before the end of the year, said Profit analyst Arnic.

The fourth quarter you have such low hurdles because of what happened last year, it doesn't really give you an indication of what demand for these businesses really is, he said. I'm concerned. There's nothing to suggest we've had a material pickup in a lot of the names I cover.

That was a point made by Dominic Pileggi, CEO of electrical components maker Thomas & Betts Corp , which posted a higher-than-forecast profit but lowered the upper end of its 2009 earnings outlook range.

We do not expect any meaningful improvement in our key markets in the fourth quarter, Pileggi said.

Thomas & Betts shares gained 5 percent to $34.06. Cooper shares were lower in morning trade, losing 1 percent to $38.93 on the New York Stock Exchange.

But Danaher and 3M gained. Danaher stock was up 0.9 percent to $71.19, while 3M -- part of the Dow Jones industrial average <.DJI> was up 2 percent to $77.85.

(Additional reporting by Bhaswati Mukhopadhyay in Bangalore and Aarthi Sivaraman in Seattle, editing by Dave Zimmerman)