Cummins' Guidance Raises Red Flags for Caterpillar

Some management teams have a tendency to stubbornly hold onto guidance while Rome burns, while others deal with realism, take their medicine early, and prepare to get better. Engine and component manufacturer Cummins (NYSE: CMI) is probably in the latter camp, and management's recent and extensive end-market commentary served as a salutary warning as to what investors in companies might expect later in the year.

Let's take a look at what was said and why it matters.

There's no doubt that many industrial end markets are slowing, with a slew of companies having lowered guidance during the recent earnings season. Cummins was no different, with management lowering its full-year revenue growth estimate to flat from a previous estimate of flat to 4% growth. Moreover, the revenue growth estimate for its most important segment (engine) was taken down to negative 2% to positive 2% from a previous estimate of 1% to 5%.

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Source Fool.com