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Cummins (CMI) Tops Q2 Earnings, Revises Revenue Outlook
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Cummins Inc.’s (CMI - Free Report) earnings per share decreased 8.4% to $2.40 in the second quarter of 2016 from $2.62 earned in the year-ago quarter. The bottom line, however, surpassed the Zacks Consensus Estimate of $2.15. Net income fell 13.8% to $406 million from $471 million in the second quarter of 2015.
Revenues declined 10% year over year to $4.53 billion in the reported quarter. The figure, however, outpaced the Zacks Consensus Estimate of $4.51 billion. The year-over-year drop was due to lower production in North America and sluggish global demand for off-highway and power generation equipment.
Operating income decreased significantly to $567 million from $723 million a year ago. Earnings before interest and taxes (“EBIT”) dropped to $591 million (13.1% of sales) from $721 million (14.4% of sales) a year ago.
Sales in the Engine segment fell 14% to $2 billion due to a 15% decline in on-highway revenues, resulting from weaker truck production in North America. The segment’s EBIT decreased to $206 million (10.3% of sales) from $278 million (12% of sales) a year ago.
Sales at the Components segment fell 8% to $1.3 billion owing to lower sales in North America attributable to lower truck production, partially offset by growth in China. This segment’s EBIT declined to $190 million (14.9% of sales) from $223 million (16% of sales) in the prior-year quarter.
Sales at the Power Generation segment fell 16% to $921 million due to a drop in sales in major markets resulting from a decline in demand for power generation equipment and industrial engines. The segment’s EBIT went down to $90 million (9.8% of sales) in second-quarter 2016 from $127 million (11.6% of sales) in second-quarter 2015.
Sales at the Distribution segment dropped 3% to $1.5 billion. Revenues benefited from the company’s acquisitions undertaken. However, this gain was offset by adverse currency movements and a decline in organic sales in North America and the Middle East. The segment’s EBIT declined to $87 million (5.6% of sales) from $113 million (7.6% of sales) a year ago.
Financial Position
Cummins’ cash and cash equivalents decreased to $1.04 billion as of Jul 3, 2016, from $1.7 billion as of Dec 31, 2015. Long-term debt totaled $1.65 billion as of Jul 3, 2016, compared with $1.61 billion as of Dec 31, 2015.
In the first half of 2016, Cummins’ net operating cash flow increased to $734 million from $569 million in the same period a year ago. Capital expenditures decreased to $189 million from $247 million in the prior-year period.
Capital Deployment
Cummins is focused on enhancing shareholder value by pursuing aggressive share repurchases and increasing dividend payouts. The company returned $1 million to shareholders in the first half of 2016 through dividends and share repurchases. This is consistent with Cummins’ plans to return 75% of its full-year operating cash flow to shareholders this year in the form of share repurchases and dividends. In the second quarter of 2016, the company repurchased 1.8 million shares.
In a bid to boost shareholder value, Cummins, in Jul 2016, declared a 5.1% hike in its quarterly cash dividend to $1.025 per share from the prior payout of 97.5 cents. The new dividend will be paid on Sep 1, to shareholders on record as of Aug 22, 2016.
2016 Guidance
For 2016, Cummins anticipates revenues to decline by 8%−10% compared with the previous forecast of a 5%–9% fall. The company revised the revenue outlook due to lower expectations for North American truck production and sluggish demand in global off-highway markets. EBIT is expected in the 11.6%–12.2% range.
Zacks Rank
Currently, Cummins carries a Zacks Rank #3 (Hold).
Some better-ranked automobile stocks include The Goodyear Tire & Rubber Company (GT - Free Report) , Johnson Controls Inc. (JCI - Free Report) and Gentex Corp. (GNTX - Free Report) , each carrying a Zacks Rank #2 (Buy).
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Cummins (CMI) Tops Q2 Earnings, Revises Revenue Outlook
Cummins Inc.’s (CMI - Free Report) earnings per share decreased 8.4% to $2.40 in the second quarter of 2016 from $2.62 earned in the year-ago quarter. The bottom line, however, surpassed the Zacks Consensus Estimate of $2.15. Net income fell 13.8% to $406 million from $471 million in the second quarter of 2015.
Revenues declined 10% year over year to $4.53 billion in the reported quarter. The figure, however, outpaced the Zacks Consensus Estimate of $4.51 billion. The year-over-year drop was due to lower production in North America and sluggish global demand for off-highway and power generation equipment.
Operating income decreased significantly to $567 million from $723 million a year ago. Earnings before interest and taxes (“EBIT”) dropped to $591 million (13.1% of sales) from $721 million (14.4% of sales) a year ago.
CUMMINS INC Price, Consensus and EPS Surprise
CUMMINS INC Price, Consensus and EPS Surprise | CUMMINS INC Quote
Segment Performance
Sales in the Engine segment fell 14% to $2 billion due to a 15% decline in on-highway revenues, resulting from weaker truck production in North America. The segment’s EBIT decreased to $206 million (10.3% of sales) from $278 million (12% of sales) a year ago.
Sales at the Components segment fell 8% to $1.3 billion owing to lower sales in North America attributable to lower truck production, partially offset by growth in China. This segment’s EBIT declined to $190 million (14.9% of sales) from $223 million (16% of sales) in the prior-year quarter.
Sales at the Power Generation segment fell 16% to $921 million due to a drop in sales in major markets resulting from a decline in demand for power generation equipment and industrial engines. The segment’s EBIT went down to $90 million (9.8% of sales) in second-quarter 2016 from $127 million (11.6% of sales) in second-quarter 2015.
Sales at the Distribution segment dropped 3% to $1.5 billion. Revenues benefited from the company’s acquisitions undertaken. However, this gain was offset by adverse currency movements and a decline in organic sales in North America and the Middle East. The segment’s EBIT declined to $87 million (5.6% of sales) from $113 million (7.6% of sales) a year ago.
Financial Position
Cummins’ cash and cash equivalents decreased to $1.04 billion as of Jul 3, 2016, from $1.7 billion as of Dec 31, 2015. Long-term debt totaled $1.65 billion as of Jul 3, 2016, compared with $1.61 billion as of Dec 31, 2015.
In the first half of 2016, Cummins’ net operating cash flow increased to $734 million from $569 million in the same period a year ago. Capital expenditures decreased to $189 million from $247 million in the prior-year period.
Capital Deployment
Cummins is focused on enhancing shareholder value by pursuing aggressive share repurchases and increasing dividend payouts. The company returned $1 million to shareholders in the first half of 2016 through dividends and share repurchases. This is consistent with Cummins’ plans to return 75% of its full-year operating cash flow to shareholders this year in the form of share repurchases and dividends. In the second quarter of 2016, the company repurchased 1.8 million shares.
In a bid to boost shareholder value, Cummins, in Jul 2016, declared a 5.1% hike in its quarterly cash dividend to $1.025 per share from the prior payout of 97.5 cents. The new dividend will be paid on Sep 1, to shareholders on record as of Aug 22, 2016.
2016 Guidance
For 2016, Cummins anticipates revenues to decline by 8%−10% compared with the previous forecast of a 5%–9% fall. The company revised the revenue outlook due to lower expectations for North American truck production and sluggish demand in global off-highway markets. EBIT is expected in the 11.6%–12.2% range.
Zacks Rank
Currently, Cummins carries a Zacks Rank #3 (Hold).
Some better-ranked automobile stocks include The Goodyear Tire & Rubber Company (GT - Free Report) , Johnson Controls Inc. (JCI - Free Report) and Gentex Corp. (GNTX - Free Report) , each carrying a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>