Ingersoll-Rand Plc's fourth-quarter profit and first-quarter forecast fell short of Wall Street expectations as demand for its heating and cooling systems showed few signs of picking up.

The news overshadowed an increase in the U.S. manufacturer's full-year profit forecast and sent the company's shares sliding 8 percent in early trading on Friday.

They have a tendency to seem a little more optimistic in guidance, a little less in delivery, said Eli Lustgarten, an analyst at Longbow Securities. It is a weaker quarter, you have a weaker first quarter coming ... There is probably a little more skepticism.

Overall sales fell 9.9 percent in the quarter, slightly more than analysts had forecast. The company's largest unit, Climate Solutions, which sells commercial air conditioning, heating and refrigeration units used in large commercial and institutional buildings, posted a sharper 13.6 percent drop.

The Architecture Billings Index, a leading indicator of U.S. commercial and institutional construction, has signaled contraction for the past two years. Companies have slashed their payrolls, leaving many needing less space, while tight credit markets have made it hard for those who do want to put up new buildings to finance those projects.

United Technologies Corp's Carrier unit, the world's largest maker of air conditioners, reported a similar 13.5 drop in fourth-quarter revenue last month.

Ingersoll warned that it expects construction activity, which drives sales of commercial heating and cooling equipment, to remain weak.

We expect challenging U.S. and European nonresidential construction markets for most of the year, Chief Executive Michael Lamach said. He added that he expects North American nonresidential activity to continue to decline through the first quarter.

U.S. supermarket chains have cut back on capital spending, dulling demand for refrigerated cases as well as air conditioning systems, Ingersoll Chief Financial Officer Steven Shawley told investors on a conference call.

Illinois Tool Works , which also makes refrigerated cases for food retailers, posted a 10 percent drop in fourth-quarter food equipment revenue.


Ingersoll reported profit of 48 cents per share excluding one-time items, below the 53 cents that analysts, on average, had expected, according to Thomson Reuters I/B/E/S.

Fourth-quarter net profit attributable to the company came to $139.4 million, or 42 cents share. A year earlier, it recorded a net loss of $3.29 billion, or $10.27 per share, including a charge of $10.56 per share related to a decline in the value of its air-conditioning business.

Ingersoll set a first-quarter profit target of 10 cents to 15 cents per share. Analysts had expected 38 cents excluding one-time items, on revenue of $3.02 billion.

Ingersoll now forecasts 2010 earnings per share of $2.20 to $2.60, up from its October forecast of $2.00 to $2.40. The forecast excludes expected restructuring expenses of 25 cents per share.

Ingersoll, which makes cooling units for homes, businesses and vehicles, last week passed the CEO reins to insider Lamach from Herb Henkel, who had served in that role since 1999 and remains chairman.

The company, which maintains its physical headquarters in Piscataway, New Jersey, last year transferred its incorporation to Ireland from Bermuda, a move intended to lower its tax bill.

Its shares fell $2.61 to $31.30 in morning trade on the New York Stock Exchange. Earlier, they were as low as $30.13, their lowest level since last October.

Over the past year, the shares have almost doubled in value, sharply outpacing the 36 percent rise in the Standard & Poor's capital goods industry index.

(Reporting by Scott Malone; Editing by Gerald E. McCormick, Steve Orlofsky and John Wallace)