UPDATE 4-Cummins profit beats expectations, raises outlook

* Q2 adjusted EPS of $2.41 a share beats estimates

* Sales jump 45 pct to $4.64 bln

* Raises 2011 sales view to $18 bln

* Expects China slowdown in Q3

* Shares up 4.3 pct (Adds China comments from conference call, analyst comment)

By A. Ananthalakshmi

NEW YORK, July 26 (Reuters) - Diesel engine maker Cummins Inc (CMI.N) raised its 2011 outlook after a strong second-quarter profit that beat Wall Street expectations and sent its shares higher.

Cummins, which also makes power generation equipment and filtration systems, warned of a near-term slowdown in China. It said measures taken by the Chinese government to control inflation have hit demand for its engines used in trucks and off-highway markets.

But the company sees the fall in demand as just a correction and will continue with its plans to add capacity in the Chinese market, Chief Operating Officer Tom Linebarger said on a conference call with analysts.

The third quarter will likely be the low point, and improvement will be seen again in the fourth quarter, Linebarger said.

Cummins shares were boosted by the profit beat from strong growth across all its segments and international markets, and were up 4.3 percent in late morning trading to $111.28.

Last week, heavy machinery maker Caterpillar Inc (CAT.N), which competes with Cummins in some markets, said economic growth in the United States and other developed economies was weaker than expected and reported signs of a slowdown in China.

Higher interest rates and other policy moves to tame inflation have raised concerns among investors that China's growth could slow abruptly.

Cummins expects strong growth in Brazil and India, and for its power products in China.

Manufacturers such as Cummins and United Technologies (UTX.N), which have greater exposure to international markets, have posted better results in their most recent quarters than companies like Ingersoll Rand (IR.N), which have significant exposure to U.S. consumers.

STRONG Q2 BEAT

Cummins' second-quarter earnings rose to $505 million, or $2.60 a share, from $246 million, or $1.25 a share, a year earlier.

Excluding some gains, the company earned $2.41 a share, beating Wall Street expectations of $2.01, according to Thomson Reuters I/B/E/S.

Sales rose 45 percent to $4.64 billion, exceeding analysts' estimates of $4.27 billion.

"This is one of the best results to come out so far (among industrials)," said Morningstar analyst Basili Alukos.

He said the company was probably gaining market share in emerging markets like China.

Cummins raised its 2011 forecast for profit margin before interest and taxes to 14.5 percent from 14 percent and its sales outlook for the year to $18 billion from $17 billion.

Engine sales rose 53 percent in the second quarter on strong truck, mining, and oil and gas markets. The company, which gets almost two-thirds of its revenue from the international markets. (Reporting by A. Ananthalakshmi, editing by Gerald E. McCormick, Lisa Von Ahn and Tim Dobbyn)