World number two truck maker Volvo posted a smaller-than-expected rise in fourth-quarter earnings on Friday, hit by problems as output was ramped up, but raised its market outlook for its main markets.

Sweden's Volvo posted operating earnings of 5.52 billion Swedish crowns ($856 million) compared to a year-ago loss of 2.32 billion crowns to come in below a mean forecast for a profit of 5.99 billion seen in a Reuters poll of analysts.

Volvo, the second-biggest truck maker after Germany's Daimler , provided evidence of an upturn with order bookings of its trucks surging 63 percent year-on-year in the fourth quarter while seeing further market recovery this year.

Volvo, which makes heavy-duty trucks under the Renault, Mack, UD Trucks and Eicher brands, raised its forecast for 2011 truck markets in Europe and North America to about 220,000 units from 200,000, implying double-digit growth in both markets.

While demand looks set to be buoyant, prospects for further improvement of margins is less obvious as truck makers turn on the taps for new investment, which were closed as the global financial crisis triggered the worst fall in demand in decades.

(Editing by Mike Nesbit)

($1=6.445 Swedish Crown)

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