Cummins profit drops sharply, shares tumble five percent
(Reuters) - Cummins Inc (CMI.N) reported a sharper-than-expected drop in first-quarter earnings on Tuesday, citing weak demand for its turbines and engines, especially from the mining and oil and gas industries.
The company's shares tumbled 5 percent in morning trading.
Cummins, which makes diesel engines, gas turbines, turbochargers and a variety of filtration products, is the latest company to complain of a drop in demand from resource companies.
Last week, Caterpillar Inc (CAT.N) posted disappointing quarterly results and cut its 2013 profit forecast. One factor it cited was a drop in demand for heavy equipment from mining customers.
Timken Co (TKR.N), the specialty steel and ball-bearing manufacturer, also reported a sharply lower profit last week, citing weak demand from the oil and gas industry.
But like Timken, Cummins said its business improved as the quarter went on and it stuck to its full-year earnings forecast.
One reason for the company's optimism: Natural gas prices have risen off the low they hit late last year as the United States starts to clear a natural glut created by the hydraulic fracturing revolution.
With prices improving, drilling activity is picking up again and companies like Cummins, Caterpillar and Timken that supply drillers with engines, compressors, specialty steel and other products say they expect their sales to the industry to rebound.
First-quarter net profit fell to $282 million, or $1.49 a share, from $455 million, or $2.38 a share, a year earlier.
Analysts on average had expected $1.86 a share, according to Thomson Reuters I/B/E/S.
Sales dropped 12 percent to $3.9 billion.
Sales in the United States and Canada, which accounted for half of Cummins' revenue during the quarter, fell 15 percent, primarily as a result of lower demand from makers of commercial trucks as well as continued weakness from oil and gas markets, the company said.
Cummins shares were down 5.5 percent at $106.99 on the New York Stock Exchange.