Major U.S. manufacturers posted sharply higher profits on Wednesday, fueled by robust demand in Asia and elsewhere for everything from heavy machinery to elevators and a resurgent market for aerospace parts and services.

United Technologies Corp. and Honeywell International Inc., along with construction and mining machinery maker Caterpillar Inc., also issued strong profit forecasts for the year, a sign that the manufacturing sector is firing on all cylinders

"They're lean; they're mean and we still think they have plenty of operating leverage," said Richard Steinberg, president of Steinberg Global Asset Management, referring to Wednesday's manufacturing earnings trifecta.

The results provided relief for the U.S. stock market, which has been buffeted by weak global sales from 3M Co. and weaker-than-expected earnings from IBM. The Dow Jones industrial average was up slightly in early afternoon trading.

China, which reported earlier Wednesday that its economy expanded by 9.5 percent in the year through the first quarter, and its thirst for construction and mining equipment is a key driver for the U.S. industrial sector.

At the same time, a resurgent aerospace market with new orders for planes is fueling growth at Honeywell, the world's largest maker of cockpit electronics, and United Technologies' engines, parts and services business. A relatively weak dollar, which makes U.S. products cheaper overseas, has buoyed demand.

"The sector remains strong on a couple of fronts. The top line demand remains strong and they're able to flow those revenues through to earnings," said Tim Ghriskey, chief investment officer at Solaris Asset Management.

Honeywell Chief Executive David Cote, echoed that sentiment on a conference call with analysts earlier in the day.

"Things feel pretty darn good right now and I'm excited by how we started the year," Cote said, after the company reported a 22 percent rise in first-quarter profit to $359 million, or 42 cents per share -- two cents higher than Wall Street expected.

AEROSPACE AND CONSTRUCTION

Honeywell, with products ranging from anti-freeze to thermostats, said sales rose 4.4 percent to $6.45 billion on strong results at its aerospace business as well as robust sales of in Europe and Asia for turbo chargers, which improve the fuel efficiency of diesel engines.

Honeywell continues to thrive in its mainstay aerospace business, thanks to a rebound in passenger flying miles, orders for new planes and growth in "aftermarket" demand for parts and services.

Analysts expect aerospace will continue to do well through the year and see growth at its turbo charger business. Earnings at its auto-parts business has cashed in on strong European demand for fuel-efficient turbo chargers used in diesel car engines.

Industrial and aerospace conglomerate United Technologies Corp.said quarterly earnings jumped 18 percent to $651 million, or $1.28 a share -- three cents higher than expected.

The company posted a better-than-expected rise in quarterly revenue to $9.4 billion and also raised its full-year earnings forecast to a range by about a nickel.

Profit and sales rose at all six of United Technologies' business units, with Otis, Pratt & Whitney jet engines, Sikorsky helicopters and UTC Fire & Security delivering profit growth of more than 10 percent.

"This is an exceptional start to 2005 and gives us confidence to raise our full-year earnings outlook accordingly," Chief Executive George David said in a statement.

Demand for equipment for mining and construction projects around the world buoyed results at Caterpillar, which posted a 38 percent rise in quarterly income to $581 million, or $1.63 a share.

The strong results, and higher profit outlook, on the back of strong sales volume and price increases come in the face of surging costs for steel and other raw materials needed to make its construction and earth moving machinery.

"It looks like they're really gaining some traction in their battle against rising raw material costs and that's dropping to the bottom line," said Scott Burns, an analyst with Morningstar. "It's pretty astonishing, the volumes are up just about everywhere."

Caterpillar said it expects mining companies to continue adding capacity, and sees global demand for energy, large infrastructure projects, commercial construction and housing continuing to spark demand for Caterpillar's equipment.

The strong showing from the sector shows the economy is strong globally and these companies have maintained some pricing power, according to David Joy, vice president of capital markets strategy for American Express Financial Advisors in Minneapolis.

"While their cost inputs have been rising, they have been able to pass them along and maintain their margins. That seems to bode well for the back-end of the economy."

Source: Reuters