Cummins sees weaker demand for truck engines and components during third quarter

Cummins reported an 11% year-over-year decline in sales in its engine business and a 6% drop in its components unit.

“While we expected to see a moderation of demand in the second half of the year, sales have weakened even faster than we anticipated. Cummins is taking actions to align our cost structure with the lower revenues while maintaining investment in products that will deliver sustainable growth and profitability,” Cummins chairman and chief executive Tom Linebarger said in a release.

Company officials reported earnings per share of $3.83 for the quarter, missing analysts’ estimates of $3.84. Net income in the third quarter was $622 million, compared to net income of $692 million last year. 

Cummins reported engine sales of $2.4 billion for the third quarter, down 11% compared to last year. 

Cummins major commercial customers include Navistar International Corporation, PACCAR Inc. and Daimler AG.

The company also recorded a $33 million charge related to the decision to cease production of its 5-liter ISV engine for the U.S. pickup market by the end of this year.

Cummins on-highway revenues decreased 9% and off-highway revenues decreased by 20% for the third quarter.

Linebarger expects the company’s operating performance to be in the range of 15.9% to 16.3% of sales. This projection for earnings before interest, tax, depreciation and amortization (EBITDA), is lower than the prior guidance of 16.25% to 16.75%.

“Despite weakening conditions in a number of our largest markets, Cummins delivered strong profits, record operating cash flow, and returned a record $910 million of cash to shareholders in the third quarter,” Linebarger said.

Cummins components sales segment was $1.7 billion for the third quarter, down 6% compared to last year. While revenues in North America increased by 2%, international sales declined by 18% due to lower demand in Europe, India and China.

Segments that had positive growth for the third quarter include distribution sales at $2 billion, up 4% compared to last year, with revenues in North America increasing by 3% and international sales were up 5%.

Cummins power systems segment revenue was $1.1 billion, up 2% compared to the third quarter last year. Industrial revenues increased 3% while power generation revenues grew 2%. 

Cummins recently completed its acquisition of Canadian fuel cell and hydrogen production technologies provider Hydronics Corporation in September 2019 for $290 million.