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Cummins (CMI) Surpasses Q1 Earnings & Revenue Estimates

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Cummins Inc. (CMI - Free Report) reported adjusted earnings of $3.30 per share in first-quarter 2018, surpassing the Zacks Consensus Estimate of $2.91. The company’s earnings per share were $2.36 in the year-ago quarter.

Excluding tax charges, net income was $403 million in first-quarter 2018.

Revenues improved 21% year over year to $5.57 billion in the reported quarter. The top line also surpassed the Zacks Consensus Estimate of $5.17 billion. The year-over-year rise was owing to strong demand for trucks, construction and mining equipment.

Cummins Inc. Price, Consensus and EPS Surprise

 

Operating income decreased to $530 million from $540 million a year ago. Earnings before interest and taxes (EBIT) were $700 million (12.6% of sales) compared with $705 million (15.4% of sales) a year ago.

Segmental Performance

Sales at the Engine segment grew 21% to $2.4 billion on the back of an increase of 20% in on-highway revenues and 23% in off-highway revenues, resulting from growing demand in global truck and construction market. The segment’s EBIT increased to $286 million (11.7% of sales) from $273 million (13.5% of sales) a year ago.

Sales at the Components segment surged 30% to $1.8 billion, owing to revenue growth of 35% in North America, in addition to 25% increase in international sales, on the back of higher commercial-truck manufacturing in North America. The segment’s EBIT was $227 million (12.9% of sales) compared with the year-ago tally of $216 million (16.1% of sales).

Sales at the Power Generation segment improved 22% to $1.1 billion, banking on increased demand in mining, oil and gas, and power generation markets. The segment’s EBIT rose to $142 million (13.2% of sales) in first-quarter 2018 from $85 million (9.6% of sales) in the year-ago quarter.

Sales at the Distribution segment increased 13% to $1.9 billion. Revenues benefited from 15% rise in the North American segment and 8% growth in international markets. The segment’s EBIT plunged to $123 million (6.6% of sales) from $130 million (7.9% of sales) a year ago.

Financial Position

Cummins’ cash and cash equivalents decreased to $1.21 billion as of Apr 1, 2018, from $1.37 billion as of Dec 31, 2017. Long-term debt totaled $1.57 billion as of Apr 1, 2018, a slight decline from $1.59 billion recorded on Dec 31, 2017.

At the end of first-quarter 2018, Cummins’ net operating cash outflow was $117 million compared with an inflow of $379 million in the same period last year. Capital expenditures declined to $72 million from $81 million in the same time frame.

Capital Deployment

During first-quarter 2018, Cummins returned $341 million to shareholders in forms of dividends and share buybacks. This was in sync with the company’s plan to return 50% of operating cash inflow in 2018.

2018 Guidance

For 2018, Cummins anticipates revenues to rise 10-14% compared with the prior outlook of 4-8%. EBIT is expected to be 15.4-15.8%, a decline from the previous projection of 15.8-16.2%.

Zacks Rank & Stocks to Consider

Cummins carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the auto space are BMW AG (BAMXF - Free Report) , Dana Incorporated (DAN - Free Report) and Spartan Motors, Inc. , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

BMW has expected long-term growth rate of 4.5%. Over a year, shares of the company have gained 15.9%.

Dana has expected long-term growth rate of 10%. Shares of the company have risen 18.1% in the past year.

Spartan Motors has expected long-term growth rate of 15%. Over a year, shares of the company have gained 108.8%.

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