Archive for January, 2010

Honeywell 4Q profit slips, reaffirms guidance (AP)

Friday, January 29th, 2010 | Finance News

MORRIS TOWNSHIP, N.J. – The manufacturing conglomerate Honeywell International Inc. said Friday its fourth-quarter profit slipped 1 percent on lower sales from its aerospace and automation units.

The company reaffirmed its 2010 financial guidance. Analysts expected earnings at the high end of that range.

Its shares fell 91 cents, or 2.3 percent, to $38.91 in afternoon trading.

Honeywell said its profit fell to $698 million, or 91 cents per share, in the last three months of 2009, down from $707 million, or 97 cents per share, a year earlier.

Analysts surveyed by Thomson Reuters expected, on average, earnings of 90 cents a share.

Sales fell 7 percent to $8.07 billion from $8.7 billion a year ago. Analysts expected higher sales of $8.15 billion.

Sales from the aerospace unit fell 18 percent, the company said, because of lower volumes in the commercial aerospace aftermarket and lower original equipment sales. Meanwhile, sales from the automation and control solutions unit fell 4 percent while transportation system sales rose 13 percent. Specialty material sales fell 5 percent.

For the full year, the company earned $2.15 billion, or $2.85 per share, down from profit of $2.79 billion, or $3.76 per share, in 2008. Sales fell to $30.9 billion from $36.56 billion.

Honeywell reaffirmed 2010 profit guidance between $2.20 and $2.40 per share. Analysts expect $2.40 in profit.

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Economy grows at 5.7 pct pace, fastest since 2003 (AP)

Friday, January 29th, 2010 | Finance News

WASHINGTON – The economy grew faster than expected at the end of last year, though the engine of that growth — companies replenishing stockpiles — is likely to weaken as consumers keep a lid on spending.

The 5.7 percent annual growth rate in the fourth quarter was the fastest pace since 2003. The Commerce Department report Friday is the strongest evidence to date that the worst recession since the 1930s ended last year, though an academic panel that dates recessions has yet to declare an end to it.

The two straight quarters of growth followed a record four quarters of decline. Still, the expansion in the fourth quarter was fueled by companies refilling depleted stockpiles, a trend that will eventually fade. Some economists worry that when that happens, the recovery could

Growth exceeded expectations mainly because business spending on equipment and software jumped 13.3 percent — much more than forecast. It's the second quarter in a row that business spending has increased, after six quarters of decline.

The report provided an upbeat end to an otherwise dismal year: The nation's economy declined 2.4 percent in 2009, the largest drop since 1946. That's the first annual decline since 1991.

Still, economists expect growth to slow this year as companies finish restocking inventories and as government stimulus efforts fade. Many estimate the nation's gross domestic product will grow about 2.5 percent to 3 percent in the current quarter and about 2.5 percent or below this year.

That won't be fast enough to reduce the unemployment rate, now 10 percent. Most analysts expect it to keep rising for several months and remain close to 10 percent through the end of the year.

High unemployment is likely to keep consumers cautious about spending. Without strong consumer spending, economists worry the recovery could falter.

"That's why there's so much hand-wringing right now," said Brian Bethune, chief U.S. financial economist for IHS Global Insight. "Can the economy really sustain this? That's the big question mark sitting out there."

Still, it's a "surprisingly good report," Bethune said, with several factors contributing to growth, including a rapid rise in exports and business investment.

About 60 percent of the fourth quarter's growth resulted from a sharp slowdown in the reduction of inventories as firms began to rebuild stockpiles depleted by the recession.

A shift in the so-called inventory cycle can make a big difference to economic growth, even if overall spending by consumers and businesses grows only modestly. That's because an increase in inventories, or even just a much slower rate of decline, means that companies are producing more goods to fill orders, rather than drawing on their existing stockpiles.

Excluding inventory changes, the economy would have grown at a 2.2 percent clip, the government said. That's an improvement from 1.5 percent in the third quarter.

Besides business spending on equipment and software, also powering growth in the October-December period was consumer spending, which rose 2 percent.

A steep increase in exports also helped boost growth. The shipment of goods overseas rose 18.1 percent, far outpacing a 10.5 percent rise in imports.

Government spending was actually a slight drag on growth in the fourth quarter: A small increase in federal spending was outweighed by a drop in state and local spending.

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Wages and benefits rise weak 1.5 percent in 2009 (AP)

Friday, January 29th, 2010 | Finance News

WASHINGTON – Wages and benefits paid to U.S. workers posted a modest gain in the fourth quarter, ending a year in which recession-battered workers saw their compensation rise by the smallest amount on records going back more than a quarter-century.

The anemic gains have raised concerns about the durability of the economic recovery. The fear is that consumer spending, which accounts for 70 percent of economic activity, could falter if households don't have the income growth to support their spending.

The Labor Department said Friday that wages and benefits rose by 0.5 percent in the three months ending in December. For the entire year, wages and benefits were up 1.5 percent, the weakest showing on records that go back to 1982.

The 1.5 percent increase in total compensation in 2009 was about half the 2.6 percent increase in 2008 and both years represented the smallest gains for the government's Employment Compensation Index.

Last year, wages were up by just 1.5 percent and benefits rose by the same 1.5 percent, both record lows. In 2008, wages and salaries had been up 2.7 percent and benefits, which cover such things as health insurance and pension contributions, had risen by 2.2 percent.

The 0.5 percent rise in the fourth quarter for total compensation was slightly higher than the 0.4 percent advance economists had expected, and was the biggest quarterly gain since a 0.6 percent rise in the third quarter of 2008. Compensation had been up 0.4 percent in both the second and third quarters of this year.

Workers' compensation has been battered by the country's deep recession as a loss of 7.2 million jobs over the past two years has depressed wage gains. A separate report from the Labor Department earlier this month showed that nonsupervisory workers' inflation-adjusted weekly earnings fell by 1.6 percent last year, the sharpest drop since 1990.

The concern among economists is that the economic recovery that began in the summer could falter in coming months if consumer spending slows as households remain fearful about boosting spending in the face of such anemic wage growth.

The slow growth in employee compensation has allowed the Federal Reserve to keep interest rates at record low levels in an effort to jump-start economic activity since wage pressures, often a major force driving inflation higher, have been absent.

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