The market has seen a strong rally for the past six weeks. This has nearly everyone wondering if the economy is due for a comeback. As the stock market is often cited as a forward-looking indicator, might the economy have bottomed? Lets take a look at some old school U.S. stocks for some indication. These companies all announced earnings within the past day or two. I'm going to look at United Technologies, Caterpillar Inc., Dupont, and Norfolk Southern.
United Technologies (UTX) is very diversified in the industrial and military sectors. Think Otis Elevators, Carrier HVAC, as well as Pratt & Whitney Aerospace and Sikorsky Helecopter. With this global reach, they should be able to
give us a good indication of economic conditions out there:
- United Technologies Corp. said Tuesday its first-quarter profit fell 28 percent, as frail construction markets dragged down orders for its Otis elevators and Carrier heating and ventilation systems.
- For the quarter, net income attributable to common shareholders fell to $722 million, or 78 cents per share, from $1 billion, or $1.03 per share, in the same period last year. The latest quarter's results include 12 cents per share in restructuring costs and a tax benefit of 3 cents per share. Revenue fell to $12.2 billion from $14 billion. Analysts surveyed by Thomson Reuters expected earnings of 78 cents per share.
As most of you know, its not so much about the numbers, but what they did relative to expectations. In this case, UTX did well enough, and the market liked it (at least today). They also reaffirmed guidance for FY 2009, which is rare in this market. To give you an idea how much expectations have been lowered in this market, take a look at this quote from Analyst Rick Whittington, "This would have been the quarter the wheels are falling off the bus and it didn't." "It's not a spectacular report. The Carrier and Otis order reports are weak, yet they're not zero."
- Conversely, operating profit at Sikorsky jumped 42 percent to $116 million. Results were helped by strong military orders as the Obama administration moves more troops into Afghanistan, increasing the reliance on helicopters for troop movements and other activities.
- (CFO) Hayes said that although order rates continue to be down, they are stabilizing, particularly in China, which is starting to see some benefits from a stimulus program equal to $586 billion.
Pretty solid stuff from UTX. And good news on China.
Caterpillar's (CAT) results, however,
were a little different:
- Heavy equipment maker Caterpillar Inc. reported its first quarterly loss in 17 years on Tuesday, hurt by plunging sales and the cost of laying off thousands of workers. It also said the Obama administration should have allocated more money for roads, bridges and other public works under its stimulus plans.
- The $112 million loss highlighted the depth and breadth of a global downturn, as the company suffered double-digit sales declines in most of its businesses.
