- Company to cut 2,000 jobs to save as much as $200 million
- Sales in key markets of China and Brazil at multiyear lows
Cummins Inc. fell the most in more than three years after third-quarter profit trailed analysts’ estimates and the company reduced its annual sales forecast because of weakening demand for its heavy-duty engines.
The company also said it’s cutting 2,000 jobs as part of a plan to save as much as $200 million a year. And Chief Financial Officer Pat Ward said on a conference call that Cummins will resume share buybacks this quarter. Its board authorized a $1 billion repurchase program in July 2014.
Cummins reported quarterly earnings of $2.14 a share on revenue of $4.62 billion, trailing the average estimates of $2.60 and $4.91 billion compiled by Bloomberg. Orders in China and Brazil are at multiyear lows with no sign of improvement soon, the Columbus, Indiana-based company said in a statement. Revenue in North America rose 4 percent, compared with an 18 percent decline in international markets.
“We are taking difficult but necessary actions to lower costs in the face of weak demand in many of our markets,” Chief Executive Officer Tom Linebarger said in the statement. “Global off-highway and power generation markets have been weak for some time and are worsening.”
Cummins said revenue this year will be little changed to down 2 percent from 2014, after an earlier forecast of an increase of 2 percent to 4 percent. The company said it will record pretax costs of $70 million to $90 million this quarter related to the job cuts.
The shares dropped 8.7 percent to $102.35 at the close in New York, their biggest one-day slide since July 2012. They have declined 29 percent this year.
“While we anticipated revenue weakness from off-highway markets, the magnitude of declines from on-highway were more aggressive than expected,” David Leiker, an analyst at Robert W. Baird & Co. in Milwaukee, wrote in a research note. He has a buy rating on the shares.