Cummins Announces Second Quarter Results; Updates Outlook for 2018
The Company reports second quarter revenues of $6.1 billion
The Company reports second quarter revenues of $6.1 billion
Cummins announced that it is acquiring Silicon Valley-based Efficient Drivetrains Inc.
DiversityInc named Cummins one of the Top 50 Companies for Diversity for a 12th consecutive year
Cummins and Anhui Jianghuai Automobile Co. Ltd (JAC Motors) will form a 50:50 joint-venture
The Company returned $393 million to shareholders in the form of dividends and share repurchases
Cummins Inc. (NYSE: CMI) today reported results for the second quarter of 2018.
Second quarter revenues of $6.1 billion increased 21 percent from the same quarter in 2017 and reached a new quarterly record. The Company delivered growth in most major markets as demand for trucks, construction, mining and power generation equipment all improved. Currency favorably impacted revenues by 1 percent.
Sales in North America improved by 22 percent while international revenues increased by 18 percent led by growth in China, Europe and Latin America.
"As a result of strong customer demand for our products, solid execution from our global manufacturing and supply chain teams and continued focus on cost reduction, the Company delivered record quarterly sales and earnings per share in the second quarter,” said Chairman and CEO Tom Linebarger. “We are on track to deliver record full year sales, earnings and cash flow. The Company now plans to return 75 percent of Operating Cash Flow to shareholders in the form of dividends and share repurchases in 2018, up from our previous plan to return 50 percent."
During the second quarter, the Company finalized its plans for a previously disclosed product campaign and recorded a pre-tax charge of $181 million for the expected costs of the campaign. This campaign will address the performance of an aftertreatment component in certain on-highway products produced between 2010 and 2015 in North America. The Company has reached agreement with the appropriate regulatory agencies regarding our planned actions to execute the campaign and has provided in full for the estimated costs.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter were $897 million, or 14.6 percent of sales, up from $764 million or 15.0 percent of sales a year ago.
Net income attributable to Cummins in the second quarter was $545 million ($3.32 per diluted share), compared to net income of $424 million ($2.53 per diluted share) in the second quarter of 2017.
Based on the current forecast, Cummins expects full year 2018 revenues to be up 15 to 17 percent, compared to prior guidance of up 10 to 14 percent. EBITDA is projected to be in the range of 14.8 to 15.2 percent of sales, down from 15.4 to 15.8 percent of sales and reflects approximately $100 million of expense associated with trade tariffs and increased commodity costs in the second half of the year.
Recent Highlights:
- Cummins announced that it is acquiring Silicon Valley-based Efficient Drivetrains, Inc. (EDI), which designs and produces hybrid and fully- electric power solutions for commercial vehicle markets.
- DiversityInc named Cummins one of the Top 50 Companies for Diversity for a 12th consecutive year. Cummins ranked No. 12 on the 2018 annual list, which included more than 1,000 participating companies.
- Cummins and Anhui Jianghuai Automobile Co. Ltd. (JAC Motors) announced that the two parties will form a 50:50 joint-venture after Cummins purchases Navistar’s 50 percent equity of the JAC-Navistar Diesel Engine Company (JND).
- The Company returned $393 million to shareholders in the form of dividends and share repurchases in the second quarter, and recently raised its quarterly dividend by 5.6 percent.
1 Generally Accepted Accounting Principles
Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our forecasts, guidance, preliminary results, expectations, hopes, beliefs and intentions on strategies regarding the future. These forward-looking statements include, without limitation, statements relating to our plans and expectations for our revenues, EBITDA and agreement in principle to settle regulatory proceedings regarding our emissions certification and compliance process for pick-up truck applications. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to: any adverse consequences resulting from entering into the Agreement in Principle, including required additional mitigation projects, adverse reputational impacts and potential resulting legal actions; increased scrutiny from regulatory agencies, as well as unpredictability in the adoption, implementation and enforcement of emission standards around the world; evolving environmental and climate change legislation and regulatory initiatives; changes in international, national and regional trade laws, regulations and policies; changes in taxation; global legal and ethical compliance costs and risks; future bans or limitations on the use of diesel-powered products; failure to successfully integrate and / or failure to fully realize all of the anticipated benefits of the acquisition of Meritor, Inc. (Meritor); raw material, transportation and labor price fluctuations and supply shortages; aligning our capacity and production with our demand; the actions of, and income from, joint ventures and other investees that we do not directly control; large truck manufacturers' and original equipment manufacturers' customers discontinuing outsourcing their engine supply needs or experiencing financial distress, or change in control; product recalls; variability in material and commodity costs; the development of new technologies that reduce demand for our current products and services; lower than expected acceptance of new or existing products or services; product liability claims; our sales mix of products; uncertainties and risks related to timing and potential value to both Atmus Filtration Technologies Inc. (Atmus) and Cummins of the planned separation of Atmus, including business, industry and market risks, as well as the risks involving the anticipated favorable tax treatment if there is a significant delay in the completion of the envisioned separation; climate change, global warming, more stringent climate change regulations, accords, mitigation efforts, greenhouse gas regulations or other legislation designed to address climate change; our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions and divestitures and related uncertainties of entering such transactions; increasing interest rates; challenging markets for talent and ability to attract, develop and retain key personnel; exposure to potential security breaches or other disruptions to our information technology environment and data security; political, economic and other risks from operations in numerous countries including political, economic and social uncertainty and the evolving globalization of our business; competitor activity; increasing competition, including increased global competition among our customers in emerging markets; failure to meet environmental, social and governance (ESG) expectations or standards, or achieve our ESG goals; labor relations or work stoppages; foreign currency exchange rate changes; the performance of our pension plan assets and volatility of discount rates; the price and availability of energy; continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support our future business; and other risks detailed from time to time in our SEC filings, including particularly in the Risk Factors section of our 2023 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available at http://www.sec.gov or at http://www.cummins.com in the Investor Relations section of our website.
Cummins Inc., a global power solutions leader, comprises five business segments – Components, Engine, Distribution, Power Systems and Accelera by Cummins – supported by our global manufacturing and extensive service and support network, skilled workforce and vast technological expertise. Cummins is committed to its Destination Zero strategy, which is grounded in the company’s commitment to sustainability and helping its customers successfully navigate the energy transition with its broad portfolio of products. The products range from advanced diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, valvetrain technologies, controls systems, air handling systems, automated transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, batteries, electrified power systems, hydrogen production technologies and fuel cell products. Headquartered in Columbus, Indiana (U.S.), since its founding in 1919, Cummins employs approximately 75,500 people committed to powering a more prosperous world through three global corporate responsibility priorities critical to healthy communities: education, environment and equality of opportunity. Cummins serves its customers online, through a network of company-owned and independent distributor locations, and through thousands of dealer locations worldwide and earned about $735 million on sales of $34.1 billion in 2023.
