U.S. manufacturers of business jets, farm machinery and trucks reported earnings on Tuesday that provided fresh hope the economy may be stabilizing as once-crippled credit markets start to mend.
But results aside, Textron Inc , Agco Corp and Paccar Inc said they will keep a careful eye on costs, suggesting the coming year will continue to be tough for the tens of thousands manufacturing employees idled in the slump.
That could mean whatever recovery is under way could be weak and uneven as high unemployment continues to slow the consumer spending engine that drives the country's economy.
That downbeat message was echoed on Tuesday by a report from the Manufacturers Alliance/MAPI trade group, which warned that while a global economic recovery is in progress the rebound could be unusually sluggish.
Unfortunately, stability does not necessarily presage strength, said Cliff Waldman, the group's economist.
Textron, which makes business jets, helicopters and golf carts, posted third-quarter earnings of $4 million, or a penny a share, down sharply from $206 million, or 83 cents per share, a year earlier. Earnings from continuing operations came to 2 cents per share.
Analysts had expected the Providence, Rhode Island-based company to report a loss of 3 cents per share, according to Thomson Reuters I/B/E/S.
We continue to believe all of Textron's cyclical businesses ... are turning the corner, and that its defense business is well positioned, Goldman Sachs analyst Noah Poponak wrote in a note to clients.
The company's shares rose 8.6 percent to $19.94 in morning trading on the New York Stock Exchange.
But Textron, which has cut nearly a quarter of its workforce, sounded a cautious note as it looked forward. It said that while demand for its commercial products continues to show signs of stabilization, we believe that market recovery likely will be slow and modest.
Agco, the world's third-largest maker of farm machinery, also beat expectations, reporting a net profit of $10 million, or 12 cents a share, down from $99 million, or $1.01 a share, a year earlier.
Excluding special items, earnings were 13 cents a share. Sales fell 32.7 percent to $1.4 billion.
But analysts had expected the Duluth, Georgia-based company to report a profit of just 4 cents a share on sales on $1.37 billion.
Agco shares were up 0.7 percent at $28.84 in morning trading on the NYSE.
Still Agco, which makes farm equipment under the Massey Ferguson, Challenger, Fendt and Valtra brand names, said it was seeing softening demand in both Western Europe and North America, and continued weakness in Russia and Eastern Europe, that was only partially offset by stabilizing demand in South America.
The company said that as long as agricultural markets remained unsettled, its top priority would remain cutting costs and reducing inventory.
Expectations of lower farm income in 2009 and the lingering effects of constrained credit in some markets have negatively impacted our business, Martin Richenhagen, the company's chairman, president and chief executive, said in a statement.
Richenhagen said the company remained focused on lowering our investment in working capital in order to better align us with current market demand.
Paccar, which makes trucks under the Peterbilt, Kenworth and DAF brands, reported a third-quarter profit of $13 million, or 4 cents a share, down from $299 million, or 82 cents a share, a year earlier. Stripping out one-time items, the results were in line with analyst expectations.
But the Bellevue, Washington-based company said the market remained very challenging and said that while it was seeing mildly encouraging signs of stabilization in some key markets, it would continue to cut costs to proactively align operating expenses, capital expenditures and research and development with current market conditions.
Paccar shares were down 4.5 percent at $37.48 on Nasdaq.
(Reporting by James B. Kelleher and Scott Malone, editing by Dave Zimmerman)