Cummins Inc. shares dipped more than 4 percent Tuesday morning it reported a 9 percent drop in third-quarter revenue—a decrease the company attributed to weaker demand for its products both in North America and abroad.
The Columbus-based engine maker reported revenue of $4.2 billion in the period, short of Wall Street forecasts. Nine analysts surveyed by Zacks Investment Research expected revenue of $4.26 billion.
Third-quarter profit came in at $289 million, or $1.72 per share, compared with the $380 million, or $2.14 per share, in the same period of 2015. That was a decline of 20 percent on a per-share basis.
Earnings adjusted for one-time costs were $2.02 per share, beating Wall Street expectations. The average estimate of 12 analysts surveyed by Zacks was for adjusted earnings of $1.93 per share.
Cummins shares were down 4 percent Tuesday morning, to $122.69 each, after hitting a low of $122.54 earlier in the day.
The company said lower North American truck production and weak international demand for power-generation equipment were the main reason its sales dropped.
Revenue dropped 13 percent in North America and 3 percent internationally. Cummins said sales in China rose, partially offsetting sales declines in the Middle East and Africa.
“Due to the slow pace of growth in the global economy, we continue to face weak demand in a number of our most important markets,” Cummins Chairman and CEO Tom Linebarger said in a written statement.
Linebarger noted that the sales decline was partially offset by the company’s recent restructuring actions, and by its efforts to reduce material costs and improve both productivity and product quality.
The third-quarter performance was hurt by costs related to a previously announced quality-improvement project. Cummins is partnering with one of its automotive customers to address quality issues related to certain third-party after-treatment systems. Cummins said it booked an additional $99 million in loss contingencies for the project last quarter and the net result reduced earnings by 30 cents per share.
Cummins said it expects full-year revenue to be down 9 percent from a year ago, consistent with its previous guidance of an 8 percent to 10 percent sales decline.
Cummins shares had increased 45 percent since the beginning of the year prior to Tuesday trading, while the Standard & Poor's 500 Index had risen 4 percent.