Truck, auto demand boost industrial profits

NEW YORK/CHICAGO (Reuters) - Rising demand for trucks, driven by strong U.S. military spending and a recovering global economy, helped several U.S. manufacturers post better-than-expected results on Thursday.

Specialty truckmaker Oshkosh Corp (OSK.N) and bearings maker Timken Co (TKR.N) topped analysts estimates, with the latter company citing strong demand for components of light vehicles and heavy trucks, sending its shares up 6 percent.

But Oshkosh shares fell 2 percent as the company warned investors that its beat was entirely due to strong orders from the military, while sales of ambulances and other emergency vehicles to cash-strapped U.S. municipalities remained weak.

Recovering worldwide industrial demand has boosted demand for trucks over the past few months, and auto production has also begun to rebound after a brutal slump that sent General Motors GM.UL and Chrysler into bankruptcy.

That has also boosted results at Tyco Electronics Ltd (TEL.N), Rockwell Automation Inc (ROK.N) and Honeywell International Inc (HON.N) this earnings season.

"Automotive is one of the ... greatest year-over-year improvements for us as a business," Rockwell Automation Chief Executive Keith Nosbusch said Wednesday. "Domestically is probably where the greatest increases have come."

On Thursday, Rockwood Holdings Inc (ROC.N), a specialty chemicals maker, said its surface treatment segment saw much higher automotive volumes. Its shares were up 16 percent.

Elsewhere in the industrial sector, industrial tool maker Kennametal Inc (KMT.N) topped estimates and boosted its full-year forecast.

SECTOR'S STRONG QUARTER

Most companies continued this quarter's pattern of beating Wall Street estimates and raising full-year earnings guidance.

"Mobile end markets drove the overall sales improvement," Timken said on Thursday. The bearings maker reported earnings excluding special items of 57 cents per share, more than double the 24 cents expected by analysts, according to Thomson Reuters I/B/E/S. Sales rose 5 percent.

Timken shares rose as high as 11 percent to $35.89 in early trading to their best level since July 2008.

Earlier this month, the world's biggest bearings maker, Sweden's SKF (SKFb.ST) posted better-than-expected first-quarter results and also cited the automotive business as a key area of improvement.

Industrial tool maker Kennametal Inc, whose products tend to do well in the early part of an economic cycle, beat by a wide margin and said global industrial activity will keep improving for the rest of this year. Kennametal shares jumped 4 percent to $33.70.

Truck maker Oshkosh Corp reported stronger-than-expected quarterly earnings on Thursday as strong sales of tactical vehicles to the U.S. military offset weakness in sales of ambulances and other emergency trucks.

Oshkosh's report follows strong results from rival truck maker Paccar Inc (PCAR.O) and engine maker Cummins Inc (CMI.N).

Oshkosh's shares fell as the company noted that military orders were responsible for the beat.

"We expect fiscal 2010 to be a record year for Oshkosh in terms of sales and earnings, driven by strength in our defense segment while most of our non-defense businesses continue to face soft markets," said Robert Bohn, Oshkosh's CEO.

A number of companies pointed to China's auto sector as a growth area.

China is now the largest vehicle producing country in the world, on a path to produce 13 million to 14 million vehicles this year, noted Tyco Electronics CEO Tom Lynch on Wednesday. The company's China automotive business grew almost 200 percent in the latest quarter.

"We're now on track to reach (half a) billion of sales to this market this year," Lynch told analysts.

AUTO REBOUND

U.S.-based automakers have ramped up production in recent months to meet pent-up demand for vehicles, which fell to multi-decade lows during the recession. Still, questions remain about the sustainability of the rebound.

Total U.S. auto sales this year are seen near the 11 million mark, well up from a 9 million annual rate or so at the depth of the downturn.

Asbury Automotive Group Inc (ABG.N) chief executive Charles Oglesby said he is "guardedly optimistic" of a U.S. economic recovery he expects to bring a slow rise to auto sales in 2010.

Oglesby said he was guarded because "We've had false starts before. There are still a lot of questions in the economy. Housing is improved but still an issue."

The rise in consumer confidence shown earlier this week reflects people who are employed feeling much more comfortable with the safety of their jobs, he said. That will help those with jobs make purchases like autos, he said.

To be sure, evidence remains that the U.S. industrial economy has a ways to go before a recovery is fully under way. Fewer than one in 10 firms are operating at 85 percent of capacity, according to a monthly survey by the Manufacturers Alliance/MAPI, which otherwise showed improving orders, backlog and, therefore, confidence.

(Reporting by Nick Zieminski in New York, James B. Kelleher in Chicago, Scott Malone in Boston and Bernie Woodall in Detroit. Editing by Robert MacMillan)