Industrial leaders United Technologies Corp. and Honeywell International Inc. posted better-than-expected quarterly earnings on Wednesday, but their shares headed in opposite directions, with investors keying off profit forecasts.

United Tech shares surged more than 5 percent to a lifetime high after the company, which manufacturers products from jet engines to Otis elevators, raised its profit outlook for the year.

Honeywell shares eased 2 percent after the maker of aircraft components and industrial systems left its 2006 profit forecast unchanged. The slide follows the pattern of General Electric Co. , whose shares slid last week after the company reported better-than-expected results but stuck with its previous earnings forecast.

It's that upside guidance that really seems to drive the stock price in these situations, said Tim Ghriskey, chief investment officer at Solaris Asset Management, which owns Honeywell shares.

Overall, the results, which came on the day Amphenol Corp. , a maker of electrical and fiber-optic connectors, upped its guidance, reflect a solid manufacturing outlook, investors said.

We're in a period of manufacturing expansion, said Peter Klein, senior portfolio manager at Fifth Third Asset Management in Cleveland, Ohio, which owns shares of Honeywell and United Tech.

We may find that the stock prices may struggle even in the face of good earnings, because some of that expansion has been priced into the shares, he said.

The results received a warm reception from major brokerages, with Merrill Lynch raising its rating on United Tech to buy from neutral and Prudential raising its price targets on both United Tech and Honeywell by $1.

We're looking at pretty solid (gross domestic product) growth rates globally, continued pretty good consumer confidence and business confidence, which for us is very important, David Anderson, chief financial officer of Morris Township, New Jersey-based Honeywell, said in a phone interview.


Hartford, Connecticut-based United Tech reported first-quarter profit rose 18 percent to $768 million, or 76 cents per share, from $651 million, or 64 cents per share, a year earlier. Wall Street analysts had expected, on average, 73 cents per share, according to Reuters Estimates.

The company raised its full-year earnings forecast to a range of $3.50 to $3.60 per share, up from a prior forecast of $3.40 to $3.55. Wall Street analysts had expected $3.54, according to Reuters Estimates.

United Tech said it expects full-year revenue of $46 billion. Analysts had expected $45.88 billion.

Honeywell posted a first-quarter profit of $436 million, or 52 cents per share, compared with $358 million, or 42 cents a share, a year earlier. Sales were up 12 percent to $7.2 billion. Wall Street analysts had expected, on average, a profit of 49 cents per share.

Honeywell stood by its forecast for earnings growth of 25 percent to 30 percent for the full year. On a conference call with analysts, company officials said Honeywell expects full-year earnings of $2.40 to $2.50 per share on sales of $30.3 billion.

Analysts expect $2.47 per share on sales of $30.07 billion, according to Reuters Estimates.


In addition to solid demand for aircraft parts, investors said both companies' results reflected strong infrastructure investment around the world, from developing nations to rebuilding along the U.S. Gulf Coast, a key oil-producing region that was hard hit by hurricanes last year.

There's tons of infrastructure build going on, both domestically and internationally, said Peter Sorrentino, chief investment officer at Cincinnati-based Bartlett & Co., which manages $3.2 billion in investments and holds shares of Honeywell, United Tech and GE.

United Tech shares were trading at $62.20, up $3.30, in morning dealings on the New York Stock Exchange, valuing the company at 16.6 times forward earnings. Earlier they hit a fresh lifetime high of $62.39.

Honeywell shares slipped 94 cents to $43.22, also on the NYSE, for a price-to-earnings ratio of 18.

Both companies are components of the blue-chip Dow Jones industrial average <.DJI>, which has an average forward P/E of 15.2.