CMI Cummins Inc

   (FROM THE WALL STREET JOURNAL 2/5/16) 
   By Bob Tita 

Engine maker Cummins Inc. said its fourth-quarter profit plunged 64%, becoming the latest U.S. equipment maker pulled down by sliding demand for trucks in North America, anemic commodity prices and slower growth in developing markets.

Cummins, which supplies diesel engines for commercial trucks, construction and mining machinery, and power generators, said it now forecasts an up-to-9% revenue decline this year, from an earlier outlook for a 5% drop. Caterpillar Inc., Eaton Corp., Meritor Inc. and other commercial truck, machinery and parts suppliers also expect lower 2016 sales.

"Due to weak or slowing demand in many our major markets, 2016 will be another challenging year," Chairman and Chief Executive Tom Linebarger said during a conference call on Thursday.

The Columbus, Ind., company's new outlook implies 2016 revenue of between $17.3 billion and $18 billion, with earnings per share of about $7.90, according to analysts. Cummins's revenue for 2015 was about flat with 2014 at $19.1 billion. Profit for the year declined 15% to $1.4 billion, or $7.84 a share.

Its stock rose 7.6% to $97.57 at 4 p.m. in New York trading as part of a broad advance by industrial stocks.

Fourth-quarter profit was lower than expected, reflecting weaker demand for Cummins's commercial trucks in North America. Truck buyers dialed back purchases late in the year as U.S. industrial activity weakened.

The leading supplier of engines for heavy-duty commercial trucks said its fourth-quarter sales of heavy-duty truck engines fell 11% from a year earlier to $700 million.

A flurry of truck orders early in 2015 pushed North American truck sales to their highest level since 2006. With most trucking fleets already well-stocked with new equipment, Cummins expects industry heavy-duty truck output will fall 25% this year. The decline is in line with forecasts offered this week by truck -transmission maker Eaton and truck-axle manufacturer Meritor.

Cummins expects its revenue from heavy-duty truck engines to fall 20% this year from 2015 because of declining truck volumes in North America.

It recorded a fourth-quarter impairment charge of $211 million to reflect the diminished value of its light-duty truck engine business. Cummins, which supplies diesel engines for Ram and Nissan Motor Co. pickup trucks, expanded production capacity for V-8 engines in the U.S. in anticipation of additional customers.

"In light of the current economic situations [that expansion] is less likely in the short-term," said Rich Freeland, chief operating officer. "We'll add some non-pickup truck customers in 2016."

Cummins is facing tough business conditions in once-highflying engine markets in China and Brazil. The company said revenue from Brazil plunged 48% last year under the weight an economic recession.

Overall for the fourth quarter, Cummins reported a profit of $161 million, or 92 cents a share, down from $444 million, or $2.44 a share, a year earlier. Excluding one-time items, per-share earnings fell to $2.02 from $2.56 a year ago. Revenue declined 6% to $4.77 billion.

(END) Dow Jones Newswires

February 05, 2016 02:47 ET (07:47 GMT)

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