Engine and power generation equipment maker Cummins Inc. (CMI), on Friday reported a 59% drop in profit for the third quarter, as sales dropped 31% from last year amid continued economic weakness in many of its markets. Based on the third quarter results and forecast for the remainder of the year, the company raised its forecast for fiscal year 2009. Looking ahead, Cummins said though there are indications of improvement in some markets, it expects the economic climate to remain challenging until late 2010.
Chairman and Chief Executive Tim Solso said, "Given the continued weakness in many of our markets, the company performed extremely well in the third quarter. The decisive actions we have taken over the past several months have allowed us to remain profitable, generate cash and invest in the company's future in the face of the worst recession in decades."
For the third quarter, Columbus, Indiana-based Cummin's net income attributable to the company plunged to $95 million or $0.48 per share from $229 million or $1.17 per share in the same period last year.
The third quarter results included $22 million of restructuring and other charges associated with job cuts.
Excluding one-time items, net income attributable to Cummins Inc. for the quarter was $110 million or $0.56 per share.
On average, 17 analysts polled by Thomson Reuters expected the company to earn $0.37 per share for the quarter. Analysts' estimates typically exclude one-time charges and gains.
In the preceding second quarter, Cummins reported net income attributable to the company of $56 million, or $0.28 a share, down 81% from $293 million, or $1.49 per share, a year ago.
Sales for the third quarter plunged to $2.53 billion from $3.70 billion in the year earlier period, beating analysts' consensus revenue estimate of $2.48 billion for the quarter.
For the preceding second quarter, net sales were $2.43 billion, down 37% from $3.89 billion a year ago.
Segment wise, engine segment sales for the quarter dropped 37% to $1.44 billion from the year-ago quarter, with sales down sharply in nearly every geographic market due to the global recession. Sales for the Power Generation segment totaled $549 million, down 38% from the prior-year quarter. Commercial product sales decreased 43% and was most affected by economic slowdown in the United Kingdom, Middle East, North and Latin America.
The Components segment generated sales of $591 million, down 26% from last year. The company noted that sales and profit decline were driven primarily by large volume drop from OEM customers in North America and Europe. Distribution segment sales slipped 27% year-over-year to $422 million, affected by decreased global demand and unfavorable foreign currency movements, which affected segment sales by 5 percentage points.
The company, which makes engines and components noted that sales increased 4% on the strength of improving demand in China, India and Brazil and a short-term increase in on-highway engine and components sales in the United States. Those increases more than offset quarter-to-quarter sales declines in the company's power generation and distribution businesses.
Cummins' operating income for the recent third quarter plummeted to $147 million from $383 million in the year ago period. Gross margin for the quarter declined to $503 million from $820 million in the same period last year.
At the end of the third quarter, the company had $686 million in cash and cash equivalents on hand, compared to $534 million at the end of the second quarter and $426 million at the end of 2008.
Furthermore, Cummins said it saw an increase in engine and components sales to the medium- and heavy-duty truck engines markets in the U.S. on a sequential basis in advance of new emissions standards that take effect in January 2010.
For the nine-month period, net income atributable to Cummins Inc. tumbled to $158 million or $0.80 per share from $712 million or $3.62 per share in the same period last year. Net sales for nine months dropped significantly to $7.40 billion from $11.05 billion in the corresponding period last year.
Cummins noted that it is extremely well positioned to take advantage of a number of opportunities and market trends that offer potential for significant long-term growth.
Meanwhile, the company boosted its forecast for 2009, and now expects sales to be slightly less than 30% below 2008 levels and earnings before interest and taxes of 6% of sales, excluding restructuring charges. Previously, the company projected 2009 sales to be slightly more than 30 percent lower than last year and EBIT to be 5 percent of sales, excluding restructuring charges. Analysts currently expect the company's sales to be lower by 31.3% for the full year.
Amongst others in the sector, Warrenville, Illinois-based Navistar International Corp. (NAV), on September 9, reported a swing to loss in the third quarter, hurt by continuing weakness in truck market and higher provision for income tax expenses. The company also lowered its full year earnings guidance.
The truck maker reported a net loss for the third quarter of $12 million or $0.16 per share, compared to net income of $331 million or $4.47 per share for the year-ago quarter. Quarterly net sales and revenues dropped 36.5% to $2.51 billion from $3.95 billion in the same quarter last year.
CMI is currently trading at $44.14, down $1.78 or 3.88%, on the NYSE. In the past 52 weeks, the stock trended in a broad range of $17.70 - $51.65, with a three-month average volume of 2.74 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.