Cummins announces third quarter 2019 results
Cummins Inc. (NYSE: CMI) today reported results for the third quarter of 2019.
Cummins Inc. (NYSE: CMI) today reported results for the third quarter of 2019.
Third quarter revenues of $5.8 billion; GAAP1 Net Income of $622 million
Third quarter EBITDA of 16.6 percent of sales; Diluted EPS of $3.97
Full year 2019 revenues expected to decline 2 percent, lower than previous guidance of flat
Full year EBITDA expected to be 15.9 to 16.3 percent of sales, compared to prior guidance of 16.25 to 16.75 percent
$910 million returned to shareholders during the third quarter in the form of dividends and share repurchases.
Third quarter revenues of $5.8 billion decreased 3 percent from the same quarter in 2018. Lower demand for trucks and construction equipment drove the majority of the decline. Sales in North America were flat while international revenues decreased 8 percent. Currency negatively impacted revenues by 1 percent, primarily due to a stronger US dollar.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter were $958 million, or 16.6 percent of sales, compared to $983 million or 16.5 percent of sales a year ago.
Net income attributable to Cummins in the third quarter was $622 million ($3.97 per diluted share), compared to net income of $692 million ($4.28 per diluted share) last year. Third quarter results were positively impacted by $23 million ($0.14 per diluted share) in discrete tax items and gains of $28 million ($0.18 per diluted share) from closing out certain derivative contracts associated with the company’s foreign exchange hedging program. Third quarter net income included expenses of $35 million ($0.23 per diluted share) related to one-time actions taken to cease development and production of certain products, which will benefit future financial performance.
"Despite weakening conditions in a number of our largest markets, Cummins delivered strong profits, record operating cash flow, and returned a record $910 million of cash to shareholders in the third quarter," said Chairman and CEO Tom Linebarger. "While we expected to see a moderation of demand in the second half of the year, sales have weakened even faster than we anticipated. Cummins is taking actions to align our cost structure with the lower revenues while maintaining investment in products that will deliver sustainable growth and profitability."
2019 Outlook:
Based on the current forecast, Cummins now expects 2019 revenue to decline 2 percent compared to prior guidance of flat. The reduction in our revenue forecast is driven by lower truck production in North America, India, Brazil, and Europe, as well as lower demand in off-highway markets, including North America construction and global mining markets. The company now expects EBITDA to be in the range of 15.9 to 16.3 percent of sales. This projection for EBITDA is lower than the prior guidance of 16.25 to 16.75 percent, due to the impact of lower volumes and the acquisition of Hydrogenics.
The company plans to return 75 percent of Operating Cash Flow to shareholders in the form of dividends and share repurchases.
Our outlook does not include any potential impact of the company’s review of its emission certification process and compliance with emissions standards or expenses associated with executing future cost reduction initiatives.
Third Quarter 2019 Highlights:
- The Company’s new 2020 X15 Efficiency Series engine will meet 2021 greenhouse gas standards one year early in North America, delivering up to 5% better fuel economy than the prior X15 Efficiency Series. The X15 Efficiency Series is paired with a 12-speed Cummins Eaton Joint Venture Automated Manual Transmission and delivers both improved fuel economy and reliability for customers, while lowering greenhouse gas emissions.
- Cummins closed on its previously announced acquisition of fuel cell and hydrogen production technologies provider Hydrogenics Corporation. The acquisition was completed for $15.00 per share, representing an enterprise value of $291 million.
- The first Cummins-powered battery electric bus entered service in Santa Monica, California.
- Cummins was named to the Dow Jones Sustainability North American Index for a 14th consecutive year. The index is considered one of the most prestigious sustainability rankings.
- The company returned a record $910 million to shareholders in the form of dividend and share repurchases in the third quarter. We repurchased 4.6 million shares during the quarter, representing 2.9% of shares outstanding.
- Cummins and Freightliner announced the increased availability of the Cummins X12 engine. The X12 will be available in a Freightliner Cascadia day cab in 2020, this is the first time the X12 will be utilized in regional haul applications in North America. The X12 combined with the Cummins Eaton Joint Venture transmission delivers substantial value to weight sensitive customers as it is the lightest powertrain available for the Class 8 on-highway market, weighing only 2700 pounds.
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.
