Jump to content

Cummins Earnings: Weak Mining Demand Takes Toll


Recommended Posts

Wall Street Journal / July 30, 2013

Cummins Inc.'s second-quarter earnings fell 12%, but the engine maker raised its sales outlook on rising demand for exhaust-treatment systems from truck maker Navistar International Corp.

Cummins, the world's largest engine manufacturer by sales, expects 2013 revenue will be flat with last year's $17.3 billion, an improvement from its April forecast for flat to 5% lower.

Cummins left its pretax margin projection unchanged at 13% to 14% of sales, implying earnings per share of $8 to $8.60. Analysts had been expecting a profit of $7.90 a share on sales of $16.9 billion.

Cummins has been hurt by falling engine 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. Shipment volume of such engines in North America dropped 19% in the second quarter.

"It's a tough business," said Richard Freeland, president of Cummins's engine business, during conference call Tuesday with analysts, "There are a lot of people fighting in a flat market."

Engine sales for off-road equipment slipped 11% during the quarter because of lower demand from mining and construction machinery makers. Cummins said engine sales to the global mining industry fell 38% as mine operators pulled back on equipment spending in response to lower prices for commodities.

China's construction machinery market remains weak. Industrywide sales of excavators were down 12% in the first quarter from an already dismal year-earlier level. "China is the most perplexing," said Tom Linebarger, Cummins's chief executive. "It's not getting a lot worse, but it's not getting a lot better either."

Cummins's strongest business during the quarter was its parts segment, where sales increased 8%. That business has been helped by rising demand for replacement parts and Navistar's orders for exhaust-treatment systems. Navistar is installing Cummins systems on its heavy and medium-duty trucks since last year when the truck maker abandoned efforts to develop its own treatment system for complying with a federal mandate to reduce nitrogen oxide in diesel-engine exhaust.

Overall for the quarter, Cummins reported a profit of $414 million, or $2.20 a share, down from $469 million, or $2.47 a share, a year earlier. Sales edged up 1.6% to $4.53 billion.

Link to comment
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • Recently Browsing   0 members

    • No registered users viewing this page.
  • Create New...