Cummins Announces Third Quarter Results, Maintains Outlook for 2018

Cummins Inc. has reported results for the third quarter of 2018. 

Third quarter revenues of $5.9 billion increased 12% from the same quarter in 2017. The company delivered growth in most major markets as demand for trucks, construction, and power generation equipment all improved. Currency negatively impacted revenues by 1%, primarily due to a weaker Brazilian Real.

Sales in North America improved by 17% while international revenues increased by 6% led by growth in India, China, Latin America, and Europe.

“We delivered record earnings this quarter due to increased demand in a number of key markets, growth in our market share and the benefits of cost reduction initiatives,” says Chairman and CEO Tom Linebarger. “We have completed our previously announced $500 million accelerated share repurchase plan and our Board of Directors recently authorized a new $2 billion share repurchase plan, which reflects our confidence in our long-term performance. Year to date, we have returned $1.4 billion to shareholders in the form of dividends and share repurchase, consistent with our plan to return 75% of Operating Cash Flow in 2018.”

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter were $983 million, or 16.5% of sales, up from $788 million or 14.9% of sales a year ago.

Net income attributable to Cummins in the third quarter was $692 million ($4.28 per diluted share), compared to net income of $453 million ($2.71 per diluted share). Third quarter results were positively impacted by $37 million in discrete tax items, of which $34 million was related to U.S. tax reform. Excluding these items, net income attributable to Cummins in the third quarter was $655 million ($4.05 per diluted share). The company now expects its 2018 effective tax rate to be 21%, excluding discrete items, compared to the prior guidance of 23%.

Based on the current forecast, Cummins expects full year 2018 revenues to be up 15-17% and EBITDA of 14.8-15.2% of sales, unchanged from prior guidance.

Recent Highlights:

• Cummins was named to the Dow Jones Sustainability North American Index for a 13th consecutive year. The index is considered one of the most prestigious sustainability rankings.
• The Cummins PowerDrive, an advanced suite of plug-in hybrid electric powertrain solutions spanning light, medium and heavy-duty applications, was unveiled at the 2018 IAA Commercial Vehicle Show.
• The company returned $682 million to shareholders in the form of dividends and share repurchases in the third quarter, including the recently completed the $500 million accelerated share repurchase announced in August.

Third quarter 2018 detail (all comparisons to same period in 2017)

Engine Segment

• Sales - $2.7 billion, up 17%
• Segment EBITDA - $405 million, or 14.9% of sales, compared to $276 million or 11.8% of sales
• Revenues increased by 18% in North America and 14% in international markets
• On-highway revenues increased 17% primarily due to increased truck production in North America

Distribution Segment

• Sales - $1.9 billion, up 10%
• Segment EBITDA - $155 million, or 8.0% of sales, compared to $120 million or 6.8% of sales
• Revenues in North America increased by 12% and international sales grew by 6%
• Strong demand for power generation equipment, oil and gas engines, and growth in parts and service drove the increase

Components Segment

• Sales - $1.8 billion, up 14%
• Segment EBITDA - $288 million, or 16.4% of sales, compared to $259 million or 16.9% of sales
• The Eaton Cummins Automated Transmission joint venture recorded sales of $150 million and was breakeven on an EBITDA basis
• Revenues in North America increased by 25%, and international sales grew by 2%

Power Systems Segment

• Sales - $1.1 billion, up 5% 
• Segment EBITDA - $163 million, or 14.7% of sales, compared to $111 million, or 10.5% of sales
• Revenues in North America increased by 7% and international sales grew 3%
• Increased demand in power generation and oil and gas markets was partially offset by lower demand in commercial marine markets

Electrified Power Segment

• Sales - $2 million
• Segment EBITDA loss - $30 million