Archive for April, 2011

Whirlpool, Electrolux fight raw materials cost rises

Wednesday, April 27th, 2011 | Finance News

NEW YORK/STOCKHOLM (Reuters) – Leading global home appliance makers Whirlpool Corp (WHR.N) and Electrolux (ELUXb.ST) backed price rises to offset soaring raw materials costs and forecast modest growth in core North American and European markets.

Growth in emerging markets, where the two industry leaders are focusing increasing efforts, was expected at a more rapid pace, they said in quarterly reports on Wednesday.

Whirlpool, global market leader with its Maytag and KitchenAid appliances, reported a rise in its first-quarter net profit rose to $169 million, or $2.17 a share, from $164 million, or $2.13 a share, a year earlier.

Excluding items, the company earned $2.11 a share, handsomely beating analysts' average estimate of $1.64, according to Thomson Reuters I/B/E/S.

Sales rose 3 percent to $4.40 billion, well above the analysts' average estimate of $4.26 billion.

"Despite a substantial increase in material and oil-related cost inflation, we are maintaining our full year earnings and cash flow outlook," Whirlpool chairman and chief executive Jeff Fettig said in a statement.

He said his company had carried out cost-based price increases in many regions around the world and remained focused on accelerating cost reduction and productivity improvements to manage rising raw materials prices.

For 2011, Whirlpool sees earnings of $12 to $13 a share.

The soaring cost of metals and plastics is an increasing headache for appliance makers and Electrolux, world number two with own brands as well as AEG and Frigidaire, forecast raw materials costs of 2 billion crowns ($328.6 million) this year.

Like Whirlpool, it has announced price rises, which Electrolux chief Keith McLoughlin said he expected would stick. The Electrolux price rise in North America has averaged 4 percent and the group wants hikes in Europe and Latin America.

Some analysts are skeptical price rises will pass muster with bargain-hungry shoppers.

Some of Whirlpool's sales gains in the quarter are likely a reflection of some pre-buying ahead of April's announced price increases, industry experts Longbow Research's David MacGregor and Keybanc Capital Markets' Kenneth Zener have said.

DEMAND

Whirlpool forecast full-year U.S. industry unit shipments rising between 2 percent and 3 percent, while Electrolux saw demand rising in North America by 3-5 percent in 2011.

In Europe, the Middle East and Africa, Whirlpool expected industry growth of 2 to 4 percent, compared with Electrolux's view of demand growth of 2 percent.

The outlook for other regions was more dynamic, with Whirlpool expecting industry shipments to rise 5 percent to 10 percent in Latin America and 6 percent to 8 percent in Asia.

Both companies have gained from their presence in fast-growing Latin American and Asian markets, fueled by the purchasing power of a burgeoning middle class.

A sluggish economy and weak housing market had dented sales in mature markets such as North America. But the companies are now profiting from signs of a U.S. recovery.

Both companies have taken plants away from high cost countries, with Whirlpool moving some operations to Mexico. Whirlpool has also started using common parts for its dishwashers, refrigerators and washing machines.

(Editing by David Cowell)

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Boeing tops profit expectations and reaffirms outlook

Wednesday, April 27th, 2011 | Finance News

CHICAGO (Reuters) – Boeing Co's first-quarter profit rose 13 percent, topping Wall Street expectations, and the company reaffirmed its full-year outlook that reflects an ongoing recovery in the commercial aerospace industry.

Shares rose slightly on the earnings beat, despite a 2 percent decline in revenue. The company also said its total order backlog grew in the quarter.

"I think people are getting comfortable with the valuation, and people are getting comfortable with the recovery," said Alex Hamilton, managing director of EarlyBirdCapital.

"What is clear is that this recovery is ongoing," he said.

The world's largest aerospace and defense company said on Wednesday its first-quarter profit came to $586 million, or 78 cents per share, compared with $519 million, or 70 cents per share, a year earlier when the company took a 20 cents-per-share charge related to health care legislation.

Analysts on average expected Boeing to report a first-quarter profit of 70 cents per share, according to Thomson Reuters I/B/E/S.

Revenue slipped 2 percent to $14.9 billion. Boeing said its total backlog grew to $329 billion during the quarter.

(For a graphic, click http://r.reuters.com/dax29r)

Boeing reaffirmed its 2011 financial outlook, and said it expects revenue in a range of $68 billion to $71 billion.

Boeing, which competes with EADS unit Airbus for orders, splits its business almost evenly between commercial airplanes and defense products. But the stock tends to track commercial airplane orders and deliveries more closely.

The commercial airplane industry is recovering from a global economic downturn that saw cash-strapped airlines curb orders in recent years.

Boeing this month said it delivered 104 commercial aircraft in the first quarter, including 87 next-generation 737s, four 767 wide-bodies and thirteen 777s. Aircraft manufacturers only get paid on delivery, usually at least 18 months after purchase.

Boeing Commercial Airplanes' (BCA) first-quarter revenue decreased by 5 percent to $7.1 billion on planned lower 777 deliveries. BCA's backlog totaled more than 3,400 airplanes valued at $263 billion, the company said.

Boeing repeated that first delivery for the long-delayed 787 Dreamliner was on track for the third quarter.

Boeing has taken about 835 orders from 56 customers for the light-weight carbon composite aircraft, which is about three years behind its original schedule due to labor problems and snags in the global supply chain.

Boeing also said delivery of the first 747-8 Freighter is still planned for mid-2011.

"BCA is still well placed, with production rates heading higher, strong order inflow and no further blow-ups this quarter on its development programs," said RBC Capital Markets analyst Robert Stallard in a research note.

Boeing Defense, Space & Security's first-quarter revenue was $7.6 billion, in line with the year-ago quarter. Earlier this year, Boeing snared a $30 billion Pentagon order 179 U.S. Air Force refueling planes.

(Reporting by Kyle Peterson; Editing by Derek Caney)

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Instant View: March durable goods orders beat expectations

Wednesday, April 27th, 2011 | Finance News

NEW YORK (Reuters) – New orders for long-lasting U.S. manufactured goods rose more than expected in March and bookings for the prior month were much stronger than initially thought, pointing to continued strength in the manufacturing sector.

For a separate gauge of U.S. Midwest manufacturing see:

KEY POINTS:

* The Commerce Department said on Wednesday durable goods orders increased 2.5 percent after an upwardly revised 0.7 percent rise in February, which was previously reported as a 0.6 percent fall. * Economists polled by Reuters had expected a 2.0 percent increase in March. Orders last month were buoyed by bookings for motor vehicles, transportation equipment and aircraft. * Excluding transportation, durable goods orders rose 1.3 percent after a revised 0.6 percent gain in February, which was previously reported as a 0.3 percent drop. Economists had expected this category to rise 1.8 percent.

COMMENTS:

CHRISTOPHER LOW, CHIEF ECONOMIST, FTN FINANCIAL, NEW YORK

"It's better than expected because the numbers were pretty much spot-on in March but revised way up in February. Even so, because there was such a big drop in January, orders are still down in the quarter as a whole. It signals at least a slowdown in equipment spending for GDP when we get that.

"It's likely that the slowdown is attributable to the weather because a lot of the economic statistics showed weakness because of storms in the east in January and February.

"I don't expect that you're going to see interruptions (from Japan) until later, maybe in the second quarter.

"It doesn't look like there was any impact from high oil prices on orders. But obviously that doesn't mean you're not going to see a reaction in the second quarter."

CORT GWON, CHIEF STRATEGIST AT HUDSONVIEW CAPITAL MANAGEMENT IN NEW YORK

"What probably happened is that rising commodities are slowing demand a little bit. As oil and other commodities rise, companies think twice about ordering new machines or other heavy goods. But in general the economy is still going strong. Some of the global headwinds we were dealing with have sort of receded to the background."

JULIA CORONADO, CHIEF ECONOMIST-NORTH AMERICA, BNP PARIBAS, NEW YORK

"It's a pretty solid report. The upward revisions do explain the recent disparity between manufacturing reports like the ISM and business investments. Now things are more in line. We are going to get a decent investment reading in Q1.

"This is not going to change a subdued reading in Q1 GDP. The manufacturing sector remains one of the stronger sectors in the economy while other sectors lag.

"The Fed is trying to walk a very fine line right now. The Q1 economic readings show how fragile the recovery still is. We have risk-averse consumers who are bending under the weight of rising energy prices. So you will probably see the Fed speak about an improving economy and acknowledge rising energy prices without sounding too hawkish. The economy still needs the support of the Fed."

VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

"Orders for durable goods finally posted the strong performance other manufacturing surveys had indicated earlier in the year, rising by a respectable 2.5% in March. Even more encouraging is the fact that February's originally reported surprise decline of 0.9% (thought to have been devoured entirely by defense orders) has been revised to a 0.7% (with larger positives and smaller negatives in nearly every good).

"This revision, as well as January's -- which is showing a better performance a tenth of a percentage point in every breakdown (headline, ex. trans, & ex. defense)-- contributes to manufacturer's average growth of 2.1% in the first three months of the year. Comparing growth annually, manufacturers ordered 9.6% more goods than what was ordered March 2010.

"The goods of larger influence, transportation and capital, rose notedly from February, by 5.9% and 3.7% -- as did most other orders such as machinery (up 4.2% after having been down 0.1%) and metals (up 3.9% vs 0.9%). Within transportation, auto orders rose 3.7% (similar to the prior month's 3.5% advance), and defense orders grew 6.3% after February's decline of 16.1%. When excluding for transportation, orders grew by 1.3% -- its second month of positive showing (Feb, up 0.6%).

"Nondefense capital goods rose by 3.2% over the month, and are up 14.4% over the year. When excluding for aircraft, these types of orders are still up 3.7%, which is better showing than the 0.5% gain in February."

MARKET REACTION:

STOCKS: U.S. stock index futures show little reaction, remain steady at higher levels.

BONDS: U.S. bond prices steady at lower levels.

FOREX: The dollar was steady at lower levels versus the euro.

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