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Cummins (CMI) Q2 Earnings & Revenues Drive Past Estimates

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Cummins (CMI) Q2 Earnings & Revenues Drive Past Estimates

Improved demand for trucks, construction and power generation equipment drives Cummins' (CMI) Q2 earnings.

Cummins Inc. CMI reported adjusted earnings of $4.14 per share in second-quarter 2018, beating the Zacks Consensus Estimate of $3.67. The company’s earnings per share were $2.53 in the year-ago quarter.

During the reported quarter, net income was $545 million compared with $424 million in the prior-year quarter.

Revenues improved 21% year over year to $6.13 billion in the reported quarter. The top line also surpassed the Zacks Consensus Estimate of $5.76 billion. The year-over-year rise was owing to the improved demand for trucks, construction and power generation equipment.

Price, Consensus and EPS Surprise

 

Price, Consensus and EPS Surprise | Quote

Earnings before interest, taxes, depreciation and amortization (EBITDA) rose $897 million (14.6% of sales) compared with $764 million (15% of sales) recorded in the prior-year quarter.

Segmental Performance

Sales at the Engine segment grew 17% to $2.7 billion on the back of an increase of 12% in North America and 32% in international markets. The segment’s EBITDA increased to $362 million (13.4% of sales) from $323 million (14% of sales) a year ago.

Sales at the Components segment surged 30% to $1.9 billion, owing to revenue growth of 36% in North America in addition with 22% increase in international sales. The segment’s EBITDA was $237 million (12.6% of sales) compared with the year-ago tally of $228 million (15.7% of sales).

Sales at the Power Generation segment improved 23% to $1.2 billion, banking on an increased demand in mining, oil and gas, and power generation markets. The segment’s EBITDA rose to $186 million (14.9% of sales) in second-quarter 2018 from $90 million (8.8% of sales) in the year-ago quarter.

Sales at the Distribution segment increased 16% to $2.7 billion. Revenues benefited from 22% rise in the North American segment and 8% growth in international markets. The segment’s EBITDA rose to $145 million (7.3% of sales) from $127 million (7.4% of sales) a year ago.

Sales at the Electrified Power Segment were $1 million while segment’s EBITDA loss was $21 million.

Financial Position

Cummins’ cash and cash equivalents were $1.32 billion as of Jul 1, 2018, from $1.37 billion as of Dec 31, 2017. Long-term debt totaled $1.57 billion as of Jul 1, 2018, a slight decline from $1.59 billion recorded on Dec 31, 2017.

At the end of the first half of 2018, Cummins’ net operating cash inflow was $473 million compared with $826 million in the same period last year. Capital expenditure was $186 million, an increase from $182 million in the same time frame.

Capital Deployment

During second-quarter 2018, Cummins returned $393 million to shareholders in forms of dividends and share buybacks. Further, the company has raised its plan to return 75% operating cash inflow compared with its previous plan to return 50%.

2018 Guidance

For 2018, Cummins anticipates revenues to rise 15-17% compared with the prior outlook of 10-14%. EBITDA is expected to be 14.8-15.2%, marking a decline from the previous projection of 15.4-15.8%.

Zacks Rank & Key Picks

Cummins currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Fox Factory Holding Corporation FOXF, AB Volvo VLVLY and Oshkosh Corporation OSK, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fox Factory has an expected long-term growth rate of 15.8%. Over a year, shares of the company have gained 29.2%.

Volvo has an expected long-term growth rate of 15%. Over a year, shares of the company have gained 2.8%.

Oshkosh has an expected long-term growth rate of 18.3%. Shares of the company have risen 7% in the past year.

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