Cummins' Truck Warning Spreads Through The System

The earnings warnings are spreading.  Cummins Inc. (NYSE: CMI) tried to masquerade a negative 2012 outlook update by hiking its dividend 25% to $0.50 per share per quarter.  The engine-maker talked about weakening demand in some markets as the global economy has stalled and the impact is running down the auto parts and services sector today.

Cummins lowered its full-year revenue outlook and now sees 2012 revenues to be in line with 2011.  Cummins had previously been targeting 10% growth in 2012 over 2011.  Second quarter revenues are expected to be approximately $4.45 billion (versus $5.07 billion expected by Thomson Reuters) and the flattish sales would come to about $18.05 billion versus $19.8 billion expected by Thomson Reuters.

Ford Motor Co. (NYSE: F) confessed in the last couple of weeks that its sales were running soft in key growth markets outside of the United States and shares fell on that news.  This is also down by 1.6% at $9.30 today versus a 52-week low of $9.05.

A more comparable company would be truck-maker Navistar International Corporation (NYSE: NAV), and its shares are down another 8% at $21.75 on the day.  Another truck-maker in the soup is PACCAR Inc. (NASDAQ: PCAR) as its shares are down 3.9% at $35.96. Vehicle-maker Oshkosh Corporation (NYSE: OSK) is down only 2.6% at $20.17.

It is somewhat surprising that the more speculative player of Westport Innovations Inc. (NASDAQ: WPRT) is down less than 5% at $33.36.

We are seeing hardly any reaction to the companies supplying parts for consumer vehicles and many commercial parts suppliers.  Auto safety systems-maker Autoliv, Inc. (NYSE: ALV) is down only 1.2% at $53.42. Delphi Automotive PLC (NYSE: DLPH) is down only 0.75% at $26.46 on the day.

JON C. OGG