Cummins Slashes Sales Guidance for Rest of 2012

Cummins Inc. (CMI) updated its sales guidance for the remainder of 2012, and the update dropped the company’s stock in premarket trading Wednesday – with further declines possible after the report is widely analyzed. The guidance seems to be another clue that the global economy is headed toward a new slowdown.

Sales at the company are expected to be at or near last year’s $18 billion after initially projecting a 10-percent increase in revenue. The second-quarter revenue report – which is due July 31 – was expected to report nearly $4.5 billion, which would be far below analysts’ expectation of just more than $5 billion.

“We have seen demand in some markets recently as growth in the global economy has slowed,” CEO Tom Linebarger said. “Order trends in the U.S. for trucks and power generation equipment have softened and demand in Brazil, China and India is not improving as we had previously expected. Our revenues have also been negatively impacted by the appreciation of the U.S. dollar against a number of currencies.”

The stock fell to $86.80 a share premarket Wednesday after the guidance was released. In an attempt to counter the guidance, the company announced it was increasing its dividend from 40 cents to 50 cents per share (2.3 percent yield).

The overall news at Cummins would not be welcomed by several hedge funds. Donald Chiboucis’ Columbus Circle Investors hasd nearly $188 million invested in Cummins at the end of the March (having increased its shareholding by 54 percent in that quarter), while Ken Heebner’s Capital Growth Management was invested about $121.5 million in new holdings at the end of the first quarter of 2012. If these numbers drag down the stock as expected – and perhaps affect the entire stock market as a whole due to the light Cummins and Caterpillar tend to shine on manufacturing – then the results for stockholders will be tough for perhaps the rest of this year.