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Cummins (CMI) Q2 Earnings Beat Estimates, Surge 113% Y/Y

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Cummins Inc. CMI reported second-quarter 2021 earnings of $4.15 per share, surpassing the Zacks Consensus Estimate of $4.06 and surging from $1.95 recorded in the year-ago period. Higher-than-expected sales and EBITDA from the Power Systems segment led to this outperformance. Cummins’ revenues increased 59% year over year to $6,111 million. The reported figure also beat the Zacks Consensus Estimate of $6,107.5 million.

Cummins Inc. Price and EPS Surprise

Cummins Inc. Price and EPS Surprise
Cummins Inc. Price and EPS Surprise

Cummins Inc. price-eps-surprise | Cummins Inc. Quote

Key Takeaways

For the reported quarter, sales for the Engine segment were up 75% year over year to $2,491 million. The segment’s EBITDA rose to $402 million (accounting for 16.1% of sales) from the prior year’s $150 million (10.5% of sales). On-highway revenues climbed 104% and off-highway revenues increased 10% from the prior-year quarter. Sales jumped 104% and 26% in North America and international markets, respectively.

Sales for the Distribution segment totaled $1,920 million, up 20% year over year. Revenues from North America edged up 18% and international sales increased 22% from the year-ago quarter. The segment’s EBITDA came in at $201 million (10.5% of sales), up from the previous year’s $160 million (10% of sales). This was on account of increased demand in power generation and engine markets.

Sales for the Components segment jumped 73% from the prior-year quarter to $1,994 million. The segment’s EBITDA was $301 million (15.1% of sales) compared with the year-ago figure of $141 million (12.3% of sales). Sales in North America markets surged 108%, while international sales soared 46% year over year.

Sales for the Power Systems segment rose 47% from the year-ago quarter to $1,143 million. The reported figure also surpassed the consensus mark of $1,086 million. The segment’s EBITDA increased to $139 million (12.2% of sales) from $91 million (11.7% of sales) registered in the year-ago period and topped the consensus mark of $124 million. Power generation and industrial revenues rose 54% and 37%, respectively, from the prior year. Stronger demand in mining markets aided the segment’s sales.

Sales for the New Power segment came in at $24 million, marking a whopping 140% rise year on year. This was chiefly driven by surging demand in transit and school bus markets along with the commissioning of electrolyzer projects. The segment recorded EBITDA of negative $60 million amid high product and technology-related expenses.

Cummins’ cash and cash equivalents were $2,481 million as of Jul 4, 2021, down from $3,401 million on Dec 31, 2020. Long-term debt totaled $3,620 million, up from $3,610 million on Dec 31, 2020.

2021 View

Cummins has reaffirmed its full-year 2021 revenue guidance. The top line is expected to grow 20-24% year over year. EBITDA is envisioned in the range of 15.5-16% of sales. The company anticipates returning 75% of operating cash flow to shareholders in the form of dividends and share repurchases in 2021.

Zacks Rank & Key Picks

Cummins currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the auto space include LKQ Corporation LKQ, General Motors GM and Toyota Motor TM, each currently flaunting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.


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