Tepid North American Market Hurts Results in 3rd Quarter, Equipment Suppliers Report
This story appears in the Nov. 7 print edition of Transport Topics.
Leading heavy-duty equipment suppliers said soft demand for their products in North America weakened third-quarter results.
Cummins Inc. reported third-quarter earnings Nov. 1, Rush Enterprises on Oct. 26 and Wabash National Corp. on Oct. 24.
Engine manufacturer Cummins reported net income for the third quarter ended Oct. 2 fell to $289 million, or $1.72 per share, compared with $380 million, or $2.14, in the 2015 period.
Revenue dropped to $4.1 billion compared with $4.6 billion a year earlier.
Lower truck production in North America and weak international demand for power-generation equipment were the most significant drivers of the decline in sales, Cummins said.
Heavy-duty engine shipments fell 33% year-over-year to 16,400, Tom Linebarger, chairman and CEO, said during an earnings conference call.
“I think we were close to 35%” heavy-duty market share in the third quarter, he said. “We’re gaining share in the market in a lot of places. With virtually every mixed-fleet customer I’ve talked to … using multiple engines, they are increasing their share with Cummins.”
Medium-duty engine shipments were about 18,000, down 20% from the 2015 period, giving Cummins a 73% market share, which was at the low end of its guidance, Linebarger said.
The OEM forecast heavy-duty truck production in 2016 to reach 200,000 units and its market share to be 27% to 30%, unchanged from second-quarter projections.
On the medium-duty side, the OEM said production dipped sharply in the third quarter and is not expected to improve in the fourth quarter. Therefore, the company lowered its full-year forecast to 108,000 units from 117,000 three months ago.
Meanwhile, national truck dealership Rush Enterprises saw income for the period ended Sept. 30 fall $5 million to $14.9 million, or 37 cents, compared with $19.9 million, or 48 cents, in the 2015 period.
Revenue slipped to $1.1 billion compared with $1.3 billion a year earlier.
“A sluggish energy sector, choppy freight environment, excess Class 8 fleet vehicle capacity and low used-truck values continued to negatively impact our new and used Class 8 truck sales and parts and service revenues in the third quarter,” Chairman and CEO W. M. “Rusty” Rush said in a statement.
“We are seeing a positive impact from our broad-reaching expense reductions implemented earlier this year and will remain diligent in controlling expenses,” he added. “We continue to invest in our strategic initiatives ranging from all-makes parts to vehicle technologies.”
Rush operates more than 100 dealerships in 21 states, the company said, and sells heavy-duty brands Peterbilt Motors Co. and International Truck, units of Paccar Inc. and Navistar Inc., respectively.
Aftermarket services accounted for about 67% of the San Antonio-based company’s total gross profits of $181.3 million in the quarter, with parts, service and body shop revenues down 6.7% compared with the third quarter of 2015, according to the company.
Also, trailer manufacturer Wabash National Corp. reported third-quarter net income edged up to $33 million, or 51 cents per share, compared with $32 million, or 47 cents, in the period ended Sept. 30.
Revenue of $464 million was down 13% from $531 million in the 2015 period, said Wabash, the nation’s largest trailer manufacturer.
Favorable pricing and operational execution across the business was offset by lower volumes, Wabash said.
Sales reflected shipments of 15,450 units, including 14,900 commercial trailer products, down by 600 from a year earlier, “coming in just shy of the low end of our prior guidance driven by some delayed shipments in our van’s business, but as well as some demand weakness in liquid tanks and platforms markets,” CEO Dick Giromini said on an earnings conference call.
The market has continued to be reasonably strong for the Lafayette, Indiana, company’s van products, he said.
“We have, however, seen continued market softness in both our tank trailer and platform products,” Giromini said. They’re on pace to be down approximately 35% from last year’s levels, but then forecasted by ACT Research Co. to increase again for next year. So we may have already seen the bottom for these markets and as exhibited by our strong financial results, have managed through it quite well.”
