Cummins Inc. (NYSE:CMI) today reported results for the third quarter of 2017.
Third quarter revenues of $5.3 billion increased 26% from the same quarter in 2016. Revenues in North America increased 25% due to higher demand in truck, oil and gas and construction markets. International sales grew 28% primarily due to strong truck and construction demand in China, sales of new products in India, and increased demand from global mining customers.
Net income attributable to Cummins in the third quarter was $453 million, or $2.71 per diluted share, compared to $289 million, or $1.72 per diluted share. The tax rate in the third quarter of 2017 was 26.5%.
Earnings before interest and taxes (EBIT) was $640 million, or 12.1% of sales, an increase from $398 million, or 9.5% of sales, a year ago.
“Cummins experienced positive momentum in demand in a number of important markets, resulting in strong sales growth in the third quarter,” said Chairman and CEO Tom Linebarger. “Earnings improved over the year-ago period due to stronger volumes and operational improvements that more than offset increased quality costs. Year to date, we have returned $913 million to shareholders in the form of dividends and share repurchases consistent with our plan to return 50% of Operating Cash Flow in 2017.”
Outlook
Based on its current forecast, Cummins expects full-year 2017 revenues to grow 14% to 15%, an increase from the company’s previous projection of 9% to 11% growth. EBIT is expected to be in the range of 11.8% to 12.2% of sales, which is unchanged from the prior guidance except for the inclusion of the impact of the new Eaton Cummins Automated Transmission Technologies joint venture. The joint venture, which is consolidated within the Components segment, is expected to report 2017 sales of approximately $150 million and negative EBIT of $25 million due in part to the amortization of intangible assets.
Third quarter 2017 highlights:
- The Company entered into an asset purchase agreement with Brammo, Inc., which designs and develops battery packs for mobile and stationary applications. When complete, this will be an important milestone in Cummins’ efforts to become a global electrified power leader.
- The Eaton Cummins Automated Transmission Technologies joint venture became fully operational on schedule on August 1. The joint venture will capitalize on the secular shift to more automated transmissions in commercial vehicle markets.
1 Generally Accepted Accounting Principles
Third quarter 2017 detail (all comparisons to same period in 2016)
Engine Segment
- Sales – $2.3 billion, up 26%
- Segment EBIT – $229 million, or 9.8% of sales, compared to $89 million or 4.8% of sales
- EBIT includes a $63 million warranty charge related to a quality campaign
- On-highway revenues increased by 25%, and off-highway revenues increased 30% primarily due to increased demand globally in truck and construction markets
Distribution Segment
- Sales – $1.8 billion, up 17%
- Segment EBIT – $91 million, or 5.2% of sales, compared to $96 million or 6.4% of sales
- Organic sales increased 12% due to improved sales to off-highway markets
- The impact of acquisitions and the disposal of power generation rental assets in North America resulted in a net percent increase in revenues
Components Segment
- Sales – $1.5 billion, up 34%.
- Segment EBIT – $217 million , or 14.2% of sales, compared to $148 million or 12.9% of sales
- International revenue increased 45%, primarily due to higher truck demand in China and the sale of new products in India
- Sales in North America increased 26% due to stronger orders from on-highway customers
Power Systems Segment
- Sales – $1.1 billion, up 23%
- Segment EBIT – $81 million, or 7.7% of sales, compared to $59 million, or 6.9% of sales
- Increased demand for industrial engines from mining and oil & gas customers was the main contributor to the revenue growth
