(Reuters) - U.S. engine maker Cummins Inc on Wednesday reported lower-than-expected quarterly profit and forecast full-year sales below analysts’ estimates, raising concerns of a slowdown in sales of heavy-duty trucks in North America, its biggest market.
Shares of the company, whose major customers include PACCAR Inc, Daimler AG and Navistar International Corp, fell more than 2 percent to $146.39 in early trading.
An expanding U.S. economy has fueled freight demand, driving heavy truck sales to touch a 10-year high at 189,000 units in North America in 2018, according to ACT Research, the industry body tracking commercial vehicle market.
However, slowing manufacturing and construction sectors in the U.S. could lead to lower capital spending by companies, leading to plateauing of freight growth in 2019, thereby hurting truck production and revenues at companies including Cummins.
The company said it expects 2019 production of heavy-duty trucks in North America to rise merely 2 percent to 292,000 units, a dip from nearly 30 percent growth registered by the industry last year.
“Looking ahead to 2019, OEMs and truckers alike are trying to determine when the market will turn negative and making business investment decisions accordingly,” Steve Tam, vice president of ACT Research, told Reuters.
Cummins’ downbeat forecast comes as preliminary net orders for heavy-duty trucks in North America plunged 68 percent to 15,800 units in January, according to ACT Research, which attributed the decline to fewer production slots available with the truck manufacturers due to a strong backlog last year.
Analysts said the weak January data might be feeding the bears and weighing on the shares of Cummins, as it forecast 2019 sales growth to be flat to up 4 percent and largely below analysts’ expectations of an increase of 2.7 percent, according to IBES data from Refinitiv.
Excluding items, the company earned $3.48 per share in the quarter ended Dec. 31, missing the Wall Street’s estimate of $3.81 per share.
Net sales of the company rose 12 percent to $6.13 billion.
Reporting by Rama Venkat in Bengaluru; Editing by James Emmanuel
Our Standards: The Thomson Reuters Trust Principles.