April 25 (Bloomberg) -- Volvo AB and MAN AG reported first-quarter earnings that beat analyst estimates as eastern Europe led truck sales higher.

Volvo stock rose 3.4 percent after the world's second- largest truckmaker lifted its sales forecast for the European market and Chief Executive Officer Leif Johansson said demand in the east of the continent and Russia is gaining as much as 30 percent annually. MAN increased its full-year revenue target.

Net income at Volvo advanced 12 percent to 4.2 billion kronor ($707 million) as sales in Russia and Poland offset U.S. declines, the Gothenburg, Sweden-based company said in a statement. Munich-based MAN, Europe's No. 3 truckmaker, posted a 41 percent gain to 322 million euros ($505 million).

``Eastern Europe is performing very well and that's the main driver for ongoing growth,'' said Michael Punzet, an analyst with DZ Bank in Frankfurt. ``I'm a little bit concerned that the weak U.S. economy might have a negative impact in the upcoming quarters.''

Volvo rose 3 kronor to 90.5 kronor. The shares have declined 17 percent this year, giving a market value of 192 billion kronor. MAN advanced 32 cents, or 0.3 percent, to 95.20 euros. It's down 16 percent this year for a value of 14 billion euros.

Forecasts Raised

Volvo said today Europe's truck market will grow by 10 percent this year, compared with a previous range of 5-10 percent. MAN's said its revenue will gain 10 percent. It had previously forecast an increase of more than 5 percent.

Heavy-truck deliveries in Europe rose 13 percent to 87,798 in the first quarter, the region's industry association said today. March sales advanced 4.5 percent in the 10 eastern countries that have joined the European Union since 2004. They fell 0.5 percent in western Europe.

``Eastern Europe and Russia are becoming very important markets,'' Volvo CEO Johansson told Bloomberg Television.

Net income at Volvo exceeded the 3.88 billion kronor predicted by analysts in a Bloomberg survey. MAN's profit beat the 274 million-euro estimate. Sales advanced 26 percent to 76.7 billion kronor at the Swedish company and by 15 percent to 3.8 billion euros at its German competitor.

``Volvo reported a strong set of results,'' London-based Morgan Stanley analyst Adam Jonas said in a note. ``In a quarter where we, and perhaps the market, were expecting a negative bias to numbers, we believe this was especially impressive.''

Moving East

European truckmakers are posting gains as booming east- European economies push demand. As they seek to increase capacity, MAN was first to move production there, opening a plant near Krakow, Poland, in October. Volvo and Scania AB, Sweden's second-largest truckmaker, are planning Russian factories.

``The commercial-vehicles boom is set to continue through 2008 because of eastern Europe,'' said Christian Aust, a Stuttgart, Germany-based analyst at Landesbank Baden- Wuerttemberg. ``MAN will overproportionally profit from this fact because of the new factory it's opened.''

MAN's Polish deliveries have more than doubled in the last four years, while Russian sales tripled in 2007 alone.

Flat Out

``In conjunction with the record order backlog, which once more swelled in the first quarter, we will again be working at the limits of our capacity,'' MAN CEO Hakan Samuelsson said today at the company's annual meeting in Munich. ``There will be a repeated advance in operating profit and our returns will match the high level of the first quarter.''

Poland is forecasting continued economic growth this year following 6.5 percent expansion in 2007, the fastest pace in a decade. The Russian government expects a 10th straight year of growth after the economy expanded 8.1 percent in 2007.

Scania, the largest western truckmaker in Russia with almost a third of the market, said this week that it won an order for 146 trucks from X5 Retail Group NV, a Russian grocer. Scania has 30 service dealerships in the country and plans to add more, said the Soedertaelje, Sweden-based truckmaker, which reports earnings April 28.

The main trouble spot for Volvo is the U.S. market, where MAN doesn't sell vehicles. North American demand remains low and inventories are high at dealers, Johansson said today.

``It's clearly a low market,'' the CEO told reporters. ``It's not coming up as we expected it.''

Dollar Impact

Volvo said the weakening of the dollar had a 400 million- krona negative impact on first-quarter profit, and that a strike at a factory in Virginia cost another 250 million kronor.

In Europe, Volvo has sold out its 2008 truck capacity and is already taking orders for 2009, a waiting time Johansson characterized as unprecedented. The continued high European demand has brought Volvo ``just on the edge of what we can do and it doesn't take much to get disturbance on the production line,'' the executive said when asked about bottlenecks.

MAN chief Samuelsson told shareholders at today's annual meeting that surging demand has halted any talk of a three-way merger with Scania and Volkswagen AG's truck unit as companies focus on increasing their own capacity. Volkswagen is the largest shareholder in MAN and Scania and MAN also owns a stake in its Swedish rival following a failed takeover attempt.

``I explicitly state my opposition to a breakup of MAN, which is more profitable than ever before, should that be planned,'' said Daniela Bergdolt, a representative for the German DSW association of private investors.

Samuelsson said he has no plans to sell the Scania stake, while MAN board chairman Ferdinand Piech, who also heads the VW board, told investors splitting MAN was ``not on the agenda.''

Cooperation is instead likely to focus on parts sharing for the next generation of trucks, Piech said. He estimates that savings from such a ``truck alliance'' amount to almost 1 billion euros annually.

To contact the reporter on this story: Chad Thomas in Berlin at cthomas16@bloomberg.net.

Last Updated: April 25, 2008 12:22 EDT