Cummins 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“weakness in global mining and power generation demand offsetting higher revenues in truck markets in North America and Brazil.”

“Power Generation revenues declined 13% year-over-year, as continued weakness in most international markets offset higher demand in North America. Third quarter revenues and new order intake were well below our expectations as demand fell sharply in India due to declining business confidence.”

“For the full year we are adjusting our forecast for the market size to 223,000 units, down from our previous forecast of 229,000 units. Demand for the new trucks — demand for new trucks has not grown as much in the second half as we expected.”

“The biggest negative impact in this quarter was India where it was not doing well up until now, but it really fell off a lot in Q3 much more than we expected as it seemed like the economy just kind of hit a tipping point. All of a sudden people started to say we have to reduce orders and we have to preserve cash now and that was frankly a surprise to us how quickly that happened and so a whole bunch of orders were cut or pushed out towards the second half of the quarter and it looks like we’ll extent into Q4, so that also impacted us.”

“there’s a whole bunch of stuff going on for Cummins which is not related to the economy that we think drives some level of growth next year. For example Euro 6 and Tier 4 Final both emissions regulations hit next year. That will have a positive impact on our components business significantly positive.”

“I think India is a big factor in us taking a more prudent position in the fourth quarter than what we may have done in the past. The drop off really in the last couple of months in the third quarter did catch us by surprise and there’s no signs that those markets are going to recover anytime soon. The other area I would throw into the mix here would be the North American truck market, the heavy duty truck market which we’re seeing weaker demand than what we envisaged three months ago.”

“right now it appears and we talked to the same people you do to the fleets, I mean the bigger fleets are kind of in a replacement mode and generally folks are not expanding fleets despite some pretty positive things if you look macro at the market, used truck prices look good, the ages of fleets, freights up.”

“the only thing I would add, broadly speaking in the truck market I think we’re seeing the same thing we’re seeing in most business-to-business environments in the U.S. If conditions are okay and they’re growing slowly, but business confidence is not very high for major investments. Basically people are making small investments and conservative investments, they’re not hiring that much. So it’s not that they’re not doing anything, but it’s pretty conservative and pretty slow versus as you know we see in the consumer economy is a little bit more robust. But business-to-business is not”

” nobody was getting ahead of themselves, they’re all kind of just staying within their – within the fairway here about what they think they can afford, they’ll buy trucks when they have a new route, they’ll replace trucks that look like their past and that’s what they’re going to do.”

“I mean it’s a tough economy and you got to figure out where you think the opportunities are. But we are getting more positions at more OEMs than ever. Why is that? Because we’ve got global scale especially in our mid range business. We make more mid range engines than anybody by 10 times. I mean we are so much larger and we’re in every market with every technology. Plus because we’re launching all these new emission products that means when you buy one of our engines at any size range, you can launch it in Brazil, you can launch an earlier version in China,”

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