COLUMBUS, Ind. (AP) -- Cummins net income slid 31 percent in the fourth quarter as the recession in Europe and slowing growth elsewhere cut into demand for its engines, but it did better than most had expected and shares rose in morning trading Wednesday.
After a strong start to the year, demand began to soften and the company cut expenses to offset weak revenue, which slide 13 percent in the final three months of the year. But the company remained cautious with the global economic picture still cloudy.
“We were able to deliver improved gross margins in the fourth quarter and record gross margins for the full year despite the weakness in demand,” said Chairman and CEO Tom Linebarger. “The work we have undertaken to reduce costs and lower inventory should benefit the company when the global economy improves, however there is uncertainty surrounding the timing and pace of improvement in end markets in 2013.”
For the three months ended Dec. 31, Cummins earned $381 million, or $2.02 per share. That's down from $548 million, or $2.86 per share, a year earlier.
Taking out restructuring charges and a one-time tax benefit, earnings were $2 per share.
Analysts surveyed by FactSet expected earnings of $1.74 per share.
Shares of Cummins added $1.95 to $199.34 in morning trading.
Selling, general and administrative expenses increased to $1.9 billion from $1.84 billion in the quarter, while research, development and engineering expenses rose to $728 million from $629 million.
Revenue fell to $4.29 billion from $4.92 billion. Wall Street forecast revenue of $4.05 billion.
Cummins Inc. said that it experienced weaker demand in truck, construction, and oil and gas markets in North America. The Columbus, Ind., company also reported softer demand overseas for power generation equipment and construction, truck and mining engines.
Full-year net income dropped 10 percent to $1.66 billion, or $8.74 per share, from $1.85 billion, or $9.55 per share, in the prior year.
Adjusted earnings were $8.61 per share.
Annual revenue fell 4 percent to $17.33 billion from $18.05 billion mostly on weaker international sales, particularly in Brazil, China and Europe.
Going forward, Cummins anticipates 2013 revenue will be flat to down 5 percent. Based on 2012's revenue of $17.33 billion, this implies $16.46 billion to $17.33 billion.