Cummins Inc. has reported results for the fourth quarter and full year of 2014.
Fourth quarter revenue of $5.1 billion, increased 11% from the same quarter in 2013. The year-over-year increase was driven by higher revenues in North America which more than offset lower demand in Brazil and Europe.
Earnings before interest and taxes (EBIT) were $629 million for the fourth quarter or 12.4% of sales. These results include $32 million of expense associated with cost reduction activities in the Power Generation business. Excluding this expense, EBIT was $661 million or 13.0% of sales. This compares to $566 million or 12.3% of sales a year ago.
Net income attributable to Cummins in the fourth quarter was $444 million ($2.44 per diluted share), or $465 million ($2.56 per diluted share) excluding one-time items, compared to $432 million ($2.32 per diluted share) in the fourth quarter of 2013.
Revenues for the full year were a record $19.2 billion, 11% higher than 2013. Acquisitions contributed 3% to revenue growth. Revenues in North America increased 20% and international sales grew 2%. Within international markets, growth in China more than offset weaker demand in Brazil and India.
EBIT for the year was $2.5 billion or 13.0% of sales. Excluding one-time items, EBIT was $2.53 billion or 13.2% compared to $2.16 billion or 12.5% of sales in 2013.
Net income attributable to Cummins for the full year was $1.65 billion ($9.02 per diluted share), or $1.67 billion ($9.13 per diluted share) excluding one-time items, up from $1.48 billion ($7.91 per diluted share) in 2013. The full year tax rate was 28.7%.
"We reported record revenues in 2014 despite weak economic conditions in several of our most important international markets," says Chairman and CEO Tom Linebarger. "Revenues grew 11% as demand in on-highway markets in North America improved, we continued executing our distributor acquisition strategy, and we delivered strong growth in China driven by new products. We continued to invest in future growth, reflecting our commitment to technology and product leadership, while growing EBIT faster than sales."
Cummins' improvement in profitability was driven by record performance in the Components and Distribution businesses and higher earnings in the Engine business. Results in the company's Power Generation business fell short of expectations, but the actions the company has taken to lower costs will improve earnings going forward. Demand in North American on-highway markets is expected to improve again in 2015, but will be partially offset by continued weakness in international markets and the negative impact of the strong U.S. dollar.
Linebarger continues, "We are committed to improving the quality of our products and service for our customers, closely managing costs and further improving our financial performance in 2015. The company delivered on its commitment to return 50% of cash from operations to shareholders in 2014 and will do so again this year."
Based on the current forecast, Cummins expects full year revenues to grow between 2 and 4%, and EBIT to be in the range of 13.5 to 14.0%.
2014 highlights:
- The Company increased its dividend by 25 percent and repurchased 4.8 million shares
- The Company received credit rating upgrades from Standard & Poor's and Moody's
- For the seventh consecutive year, Cummins was named one of the world's most ethical companies by The Ethisphere Institute
- Cummins received a perfect score in the Corporate Equality Index by the Human Rights Campaign for the 10th consecutive year
- The Company was ranked among the World's Best in Newsweek's 2014 Green Rankings
- Cummins was named one of the Top 50 companies for diversity by Diversity Inc for the seventh consecutive year
Fourth quarter 2014 detail (all comparisons to same period in 2013)
Engine Segment
- Q4 Sales - $2.8 billion, up 11%
- Q4 Segment EBIT - $315 million, or 11.1% of sales, compared to $235 million or 9.2% of sales
- Strong demand in on-highway markets in North America more than offset weakness in Brazil, China and Europe
- Full year sales $11 billion, up 9%, EBIT of $1.23 billion compared to $1.04 billion in 2013
Components Segment
- Q4 Sales - $1.3 billion, up 16%
- Q4 Segment EBIT - $160 million, or 12.1% of sales, compared to $140 million or 12.3% of sales
- Higher demand in on-highway markets in North America, Europe and China
- Full year sales $5.1 billion, up 18%, EBIT of $684 million compared to $527 million in 2013
Power Generation Segment
- Q4 Sales - $760 million, flat compared to 2013
- Q4 Segment EBIT - $22 million, or 2.9% of sales, compared to $46 million or 6.1% of sales. EBIT in the fourth quarter of 2014 includes expense of $32 million associated with cost reduction activities
- Higher revenues in Latin America and Africa offset weaker demand in Eastern Europe and India
- Full year sales $2.9 billion, down 4%, EBIT of $168 million compared to $218 million in 2013
Distribution Segment
- Q4 Sales - $1.7 billion, up 58%, up 7% excluding acquisitions
- Q4 Segment EBIT - $158 million, or 9.3% of sales, compared to $107 million or 10.0% of sales
- Current quarter included gains of $35 million, and amortization costs of $17 million related to acquisitions
- Higher revenues were primarily driven by acquisitions and stronger demand for parts and service in North America
- Full year sales $5.2 billion, up 38%, EBIT of $491 million compared to $388 million in 2013
