What: Shares of Navistar International Corp (NAV) plunged 19% today after competing engine maker Cummins (CMI -1.32%) reported weak earnings.
So what: The key number is that Cummins said engine sales were down 10% in the third quarter and the company now expects overall sales to be flat to down 2% versus previous guidance of 2% to 4% in growth. Management also announced layoffs of about 2,000 people worldwide.
This could mean that bullish comments Navistar's management made after a loss of $28 million in its fiscal third quarter that ended in June may not come to fruition. The economy in Latin America and China appears to be worse than most companies expected and it may be time for investors to readjust expectations for Navistar this year.
Now what: Navistar has been struggling with losses for more than two years now, and the last thing it needs is slowing demand for its products. After thinking that conditions could improve in 2015, it looks like that may have been a pipe dream for investors.
I don't see any reason to buy on the Cummins earnings report, and would wait to see how the market's conditions affect Navistar. But based on recent financial results there could be a long way to go before this becomes a buy for investors.
