Manufacturers' view rosier as demand returns

BOSTON/NEW YORK (Reuters) - Three major manufacturers raised their profit targets for the rest of the year on Wednesday, saying they were confident that a rebound in demand for industrial goods would hold.

Shares of United Technologies Corp , Textron Inc and Eaton Corp rose after they posted second-quarter results that topped Wall Street's expectations, easing concerns that the economy might be sliding back into recession.

United Tech, the world's biggest maker of elevators and air conditioners, posted better-than-expected quarterly profit and revenue and it raised its 2010 profit target for the second time this year. It expects full-year profit of $4.60 to $4.70 per share, representing growth of 12 to 14 percent.

Textron, the world's biggest maker of corporate jets, also posted results that beat Wall Street's forecasts.

Investors have been focused on revenue, taking that as a more bullish sign than profit growth, which in part reflects the payoff of the tens of thousands of jobs that major U.S. manufacturers shed last year.

Providence, Rhode Island based Textron, which also makes Bell helicopters and EZ-Go golf carts, looks for full-year profit of 55 cents to 65 cents per share. At the high end, that range represents growth from last year -- suggesting the company could beat new CEO Scott Donnelly's target of a return to profit growth in 2011.

UNCERTAINTY REMAINS

Donnelly, a former General Electric Co official who became Textron's CEO in December, acknowledged that demand for big-ticket items including Cessna jets wavered late in the quarter in the wake of Greece's sovereign debt crisis.

"The pace of the recovery remains uncertain with the European sovereign debt concerns, which have negatively impacted business and consumer confidence," Donnelly said on a conference call with analysts.

Profit growth at Textron's helicopter, military and industrial units offset a slide at Cessna.

Growth outside the United States, where recovery has been sluggish, has been a key boost for major manufacturers this year and the greatest risk many face is the possibility of slowing demand in Asia, which has been robust.

Eaton CEO Alexander Cutler cited that concern, though he expressed confidence the Cleveland-based maker of hydraulic and electrical systems would manage its way through it.

Eaton raised its profit forecast sharply, looking for earnings of $4.90 to $5.10 per share, above its earlier forecast of $4.30 to $4.60 per share. It also said it would raise its quarterly dividend.

"While the debt problems in Europe are likely to slow the rate of growth in some European markets, and the rate of economic growth in China has moderated slightly, we anticipate solid global growth continuing during the second half of the year," Cutler said.

Textron shares rose 7 percent to $19.37, Eaton rose 4 percent to $71.65 and United Tech shares were up less than 1 percent to $67.91 on the New York Stock Exchange.

The industrial sector has moderately outperformed the broader market this year, with the Standard & Poor's capital goods industry group notching a rise of 0.75 percent at a time the broad S&P 500 is down 3.9 percent.

(Reporting by Scott Malone; Editing by Derek Caney)