Diversified U.S. manufacturers 3M Co
Manufacturing stalwarts 3M and Honeywell said on Friday their businesses had deteriorated faster than initially feared and saw no signs of significant improvement soon.
We are no doubt in difficult times. More difficult than I foresaw four months ago, Dave Cote, Honeywell's chief executive, told analysts on a conference call. We don't know exactly how long these challenging economic times will continue.
3M, which makes products ranging from Scotch tape to optical films for liquid crystal displays, cut its 2009 per-share profit forecast by about 9 percent at its midpoint, and Honeywell cut its view by 10 percent.
I do not expect to see much in the way of end-market improvements until at least the third quarter, or possibly even the fourth quarter, said George Buckley, 3M's CEO. The year will turn out to be somewhat more challenging than we had originally expected.
The United States is about 17 months into a recession that started with the bursting of the housing bubble and has spread to economies around the world.
Honeywell shares fell 4.4 percent on the outlook news, while 3M's rose 3.3 percent. That divergence reflected investor concerns that even Honeywell's lowered forecast was overly optimistic, while 3M's was more reasonable, one analyst said.
Honeywell really seems to be a bit behind the curve in terms of addressing the magnitude of the changes happening in their markets. They say they're looking at a flattish second half of '09 which I think is not realistic, said Sterne Agee analyst Nick Heymann. 3M is getting credit for a more realistic and detailed outlook.
AVIATION, AUTOS WEAK
Honeywell, the world's largest maker of cockpit electronics, now expects the aerospace market to be far weaker than it had forecast in December.
It lowered its forecast for commercial jet activity and said it expects shipments of new corporate aircraft to fall by 25 percent or more this year.
Business jets have become a powerful symbol of corporate excess in this downturn, after the heads of Detroit's big automakers were chastised by Congress for flying to Washington in private planes to ask for money.
3M, which makes a wide range of automotive components, ranging from lighting to liners used to dampen noise, saw its sales to the North American auto industry fall 50 percent as nervous consumers shied away from buying new cars.
St. Paul, Minnesota-based 3M, a member of the Dow Jones industrials, said it expects full-year earnings to come to $3.90 to $4.30 per share, down from its prior forecast of $4.30 to $4.70.
Analysts, on average, had looked for profit of $4 per share, according to Reuters Estimates.
That original guidance was a little aggressive anyway, said Morningstar analyst Adam Fleck.
Morris Township, New Jersey-based Honeywell, which also makes thermostats and other automation systems for large buildings, said it now expects to earn $2.85 to $3.20 per share for 2009, which would represent a profit drop of 15 percent to 24 percent from the $3.76-per-share 2008 profit.
Analysts had looked for profit of $3.09 per share.
Even the revised guidance seems to have some optimistic assumptions, wrote UBS analyst Jason Feldman in a note to clients. He noted that Honeywell's forecast decline in business jet sales was more modest than UBS's.
Honeywell believes aviation demand could bottom out later this year, CFO Dave Anderson said.
ITT, which makes wastewater pumps and military equipment, cut its full-year earnings forecast to a range of $3.20 to $3.60 per share, below its February view of $3.60 to $4.00. It cited a slowdown at its commercial markets.
In the technology sector, Xerox, which makes printing equipment and supplies, cut its 2009 profit target to a range of 50 to 55 cents per share, down from a prior target of $1.00 to $1.25 per share.
3M shares rose $1.79 to $56, Honeywell fell $1.42 to $30.96, ITT slipped 2.9 percent to $41.08 and Xerox was up 4.5 percent to $6.00 as the widely watched Standard & Poor's 500 index <.SPX> was up 1.7 percent.
(Reporting by Scott Malone in Boston and Helen Chernikoff in New York; Additional reporting by Franklin Paul in New York and Karen Jacobs in Atlanta; Editing by Patrick Fitzgibbons and Brian Moss)