Cummins Profit Beats Estimates on Cost Reductions

(chinatrucks.com, Nov. 9, 2009)Cummins Inc., the largest maker of heavy-duty diesel truck engines in North America, reported third-quarter profit that topped analysts' estimates after the company cut jobs and slashed inventories.

Profit excluding some items was 56 cents a share, higher than the 37-cent average of 16 analysts surveyed by Bloomberg. Net income dropped to $95 million, or 48 cents a share, from $229 million, or $1.17, a year earlier, the Columbus, Indiana- based company said in a statement today.

Chief Executive Officer Tim Solso cut about 7,500 workers, including full-time and temporary employees, from late 2008 through June, and has since recalled about 900. Cummins said in July that it trimmed inventory by about $280 million in the year’s first half. Cummins today predicted economic conditions will remain “challenging” until late next year.

"These results support our view that Cummins is a strong manufacturer which is managing extremely well through the downturn," Daniel Dowd, a New York-based analyst with Sanford C. Bernstein & Co., said today in a note to investors. He rates the stock "market perform."

Cummins rose $2.79, or 6.1 percent, to $48.71 at 9:47 a.m. in New York Stock Exchange composite trading. The shares earlier climbed 6.3 percent, the biggest intraday gain since Aug. 7.

Cummins forecast 2009 sales will be slightly less than 30 percent lower than a year ago, compared with a July prediction that sales would fall slightly more than 30 percent.

Revenue Falls

Sales dropped 31 percent to $2.53 billion, topping an average estimate of $2.49 billion from analysts surveyed by Bloomberg. Solso said in July the company doesn't expect its markets to recover in 2009.

"While we saw improvement in some markets in the third quarter, we expect the economic climate to remain challenging until late 2010 -- especially in the United States and Europe," Solso said today in the statement.

Cummins had $686 million in cash and cash equivalents at the end of the third quarter, compared with $534 million in the second quarter.

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