(Reuters) - Cummins Inc topped Wall Street estimates for quarterly profit on Tuesday, as the U.S. engine maker was lifted by strong demand for trucks in a booming global construction market.
An expanding U.S. economy has fueled robust freight demand and a rise in orders for heavy-duty trucks. Revenue in North America, its biggest market, rose 17 percent.
The company, whose major customers include PACCAR Inc, Daimler AG and Navistar International Corp, said its international sales also grew 6 percent in the quarter due to strong demand in India, China, Latin America, and Europe.
“Growth in emerging markets, namely Brazil, India and China, will be important drivers for Cummins’ growth, as emerging markets represent approximately 30 percent of sales,” Edward Jones analyst Matt Arnold said in a pre-earnings note.
U.S. truck transportation volume is expected to rise 4.2 percent in 2018, driven by a rebound in the manufacturing industry and a healthy economy, according to a forecast from the American Trucking Associations in September.
The U.S. trucking industry generated more than $700 billion in revenue in 2017, constituting 79.3 percent of overall U.S. freight revenue.
Cummins competes with Daimler AG, Caterpillar Inc and Ford Motor Co in North America in the engine market.
Engine sales for construction equipment in North America jumped 36 percent in the third quarter ending Sept. 30, reflecting a rise in U.S. construction spend, the company said.
Revenue at its engine unit, which makes diesel and natural gas engines for heavy-duty trucks, rose 17 percent to $2.73 billion. Revenue at its components unit, which makes turbochargers and fuel systems for engines, increased 14 percent.
The U.S. engine maker reduced its tariff-related expenses for 2018 to $80 million, down from a previous estimate of $100 million.
However, Cummins on a conference call warned it would take a $250 million hit from tariff-related costs in 2019, and would try to offset these costs through pricing and improvements in its supply chain.
Cummins said the company gained $37 million in discrete tax items in the third-quarter, of which $34 million was related to U.S. tax reform.
Net income attributable to shareholders surged 53 percent to $692 million, or $4.28 per share, in the quarter.
Revenue rose 12.5 percent to $5.94 billion, marginally missing average analysts’ estimates of $5.95 billion.
Excluding items, Cummins earned $4.05 per share, above the average estimate of $3.76 per share, according to Refinitiv data.
Shares of Cummins were up nearly 1 percent in afternoon trading.
Reporting by Sanjana Shivdas in Bengaluru; Editing by James Emmanuel