Diversified U.S. manufacturers Textron Inc
They and fellow industrial company SPX Corp
Executives at the companies said on Wednesday that they would keep looking for ways to reduce costs to shore up margins in the face of falling demand. Textron plans to cut another 2,100 jobs and suspend production of its planned Citation Columbus corporate jet, which would have been its largest aircraft.
Facing a recession that began 17 months ago in the U.S. market and has spread around the world, executives said they were hoping demand for industrial products would stabilize, but it was too early to call a bottom to the downturn.
Nobody is really willing to boldly predict that, SPX Chief Executive Chris Kearney said in a phone interview. It's pretty hard to do.
In a sign of how quickly the world economy is deteriorating, Rockwell cut its profit target for the second time this year. The maker of systems that help factories run more smoothly now expects earnings of $1.40 to $1.70 per share in its fiscal year ending September 30, below its most recent February revision, which called for $1.55 to $2.25.
But Rockwell shares soared as much as 13 percent to their highest point since January after officials at the Milwaukee-based company said they might have seen the worst of the downturn.
We believe the worst, the steepest sequential declines are behind us, CEO Keith Nosbusch said in an interview [ID:nN29412332]. Now we'll be slowing the rate of decline down to where hopefully we'll see the stabilization in the second half of our year.
Rockwell shares were up 10.3 percent at $32.99 on the New York Stock Exchange after rising as high as $33.80.
John Baliotti, senior equity analyst at FTN Midwest Securities Corp in New York, cautioned that the rally in Rockwell shares might be premature.
The market is looking for names that they think, when the economy turns, are going to see a very rapid fundamental improvement, Baliotti said. I don't think we're as close as the market thinks.
Providence, Rhode Island-based Textron also slashed its profit forecast. The world's largest maker of business jets has been hard hit by a sharp falloff in demand -- customers during the quarter canceled 92 orders for the aircraft, which have become a symbol of corporate excess during the downturn.
The company is also scrambling to downsize its money-losing finance arm, which was hard hit by the credit crunch.
Earnings (in 2009) will depend in large measure on the economy and to what extent business jet orders recover, Chief Executive Lewis Campbell said on a conference call with investors. Our earnings performance is going to be tough this year.
Even the company's reduced profit forecast of 45 cents to 75 cents per share -- down from an earlier range of $1 to $1.50 -- is no sure thing, analysts said.
Underlying earnings in 2009 are weaker than expected, Citigroup analyst Jeffrey Sprague wrote in a note to clients about Textron. Earnings risks are still very high.
After the close of trading on Tuesday, Textron said it planned to sell $300 million in convertible senior notes and to offer 19 million shares of stock in a bid to boost liquidity as it radically shrinks its finance arm.
With the additional job cuts, it will have laid off about 8,300 people -- 20 percent of its work force -- since the second half of 2008.
Charlotte, North Carolina-based SPX, whose products range from cooling towers for power plants to diagnostic tools for fixing autos, posted a 60 percent drop in earnings and held to its current 2009 profit forecast, which it had cut earlier in the month.
Analysts raised concern that its estimate of second-quarter profit of 65 cents to 80 cents per share meant that it was relying on far stronger second-half results to meet its full-year target of $4.40 to $4.80.
The year is far more back-end loaded than we expected, Deutsche Bank analyst Nigel Coe wrote in a note to clients.
SPX CEO Kearney said he expected cost cuts made over the past year to add 40 cents to 50 cents per share to second-half profit.
Restructuring will be one very important factor in terms of our outlook for the balance of the year, Kearney said.
Textron shares were down 4 percent at $10.75 on the NYSE, while SPX was up 2.5 percent at $47.69.
(Reporting by Scott Malone in Boston; Additional reporting by Nick Zieminski in New York; Editing by Brian Moss)