‘Weak Demand’ Impacts Cummins 3Q Revenues
Cummins Inc.’s third-quarter earnings edged up 0.9% as the supplier of engines for heavy-duty trucks reported weaker revenue growth than expected and cut its full-year sales outlook.
The Wall Street Journal reported that Cummins, the world’s largest engine manufacturer based on sales, now expects revenue to decline 3% from 2012. It previously expected 2013 revenue to be flat.
“Revenues were below our expectations as we continue to face an environment of weak demand for capital goods in most of our major markets,” said Chairman and CEO Tom Linebarger.
Cummins reported a profit of $355 million, or $1.90 a share, up from $352 million, or $1.86 a share, a year earlier. Excluding one-time items such as tax adjustments, earnings increased to $1.94 from $1.78 a share. Net sales were up 3.6% to $4.27 billion.
Demand for Cummins’s engines has been lower this year in response to falling demand from heavy-duty truck makers and manufacturers of mining and construction machinery. Cummins is the largest supplier of heavy-duty truck engines in North America, accounting for about 40% of the market. Results for the components segment, however, have been helped by rising demand for replacement parts and demand for exhaust treatment systems from truck-maker Navistar International Corp. (NAV).
Revenue in North America increased 11%, while international revenue fell 4% as weaker demand in India, Australia and Europe offset growth in China and Brazil.
In the engine segment — the largest contributor to the top line — sales slipped 1.4% to $2.49 billion due to lower demand in global mining, stationary power and the light duty on-highway market in the U.S.
Components sales, meanwhile, climbed 14%.
Cummins unveiled cost-cutting measures several months ago, pointing to a weakening global economy. These efforts helped gross margin in the latest period widen slightly to 26% from 25.3%.