Diesel engine maker Cummins has raised its earnings outlook due to a recovery in the heavy truck sector and other markets.
Cummins, which also makes power generators and engines for construction and mining equipment, expects revenue to rise 15% this year, nearly double last year’s revenue gain of 8%, due to the broad increase in demand, a news agency report said.
The report said the truck market has been steadily improving over the past year as the US economy has gained steam – bolstering demand is the need to replace aging trucks purchased during the industry’s boom years of the late 1990s, before sales collapsed three years ago due to the economic slowdown and an oversupply of vehicles.
Strong sales in China and India are further contributing to the brighter outlook, Cummins reportedly said.
However, according to Reuters, the company warned that rapid price increases in steel, copper and other commodities could have an uncertain impact.
The raised forecast “illustrates that not only do you have strong volumes, as they indicate, but that their cost-reduction efforts have continued to take hold,” Brian Rayle, an analyst with FTN Midwest Research, told Reuters.
Battin reportedly said Cummins gained 4% of market share in its heavy truck segment in January and February.
Sales of engines for the Chrysler group’s Dodge Ram pickups are also up over last year’s record volume, she told Reuters, which noted that rising demand for Cummins’ products will result in first-quarter earnings of 65 cents to 75 cents a share, up from its previous forecast of 40 cents to 50 cents a share and compared with a loss of 86 cents a share a year ago.
Wall Street analysts on average had expected Cummins to earn 48 cents a share in the first quarter, according to Reuters Research.
The report said Cummins also raised its full-year earnings estimate and forecast a second-quarter profit that exceeded most analysts’ expectations as well.
For the full year, it reportedly raised its outlook to $4.00 to $4.20 a share from its previous forecast of $3.20 to $3.40 a share while analysts’ average estimate was $3.65 a share.
According to Reuters, Cummins said it expects to earn $1.00 to $1.10 a share in the second quarter while analysts had expected 92 cents a share on average.