Cummins Inc. (NYSE: CMI) today reported results for the first quarter of 2017.
First quarter revenues of $4.6 billion increased 7 percent from the same quarter in 2016. Stronger demand from construction and mining customers and higher sales from a distributor acquisition in the fourth quarter of last year, more than offset the impact of weaker truck production in North America. Currency negatively impacted revenues by approximately 1 percent compared to last year, primarily due to a stronger US dollar. International sales improved by 17 percent primarily due to growth in China and Europe while revenues in North America increased 1 percent.
Net income attributable to Cummins in the first quarter was $396 million ($2.36 per diluted share), compared to $321 million ($1.87 per diluted share). The tax rate in the first quarter of 2017 was 26.1 percent.
Earnings before interest and taxes (EBIT) were $566 million, or 12.3 percent of sales, an increase from $484 million or 11.3 percent of sales a year ago.
“Cummins delivered solid financial results, successfully launched new products and returned $222 million in cash to shareholders in the form of dividends and share repurchases in the first quarter,” said Chairman and CEO Tom Linebarger. “We launched our fully updated range of engines for North American truck and bus markets offering improved performance and better fuel economy for our customers. As recently announced, we also advanced our strategy to be the leading global powertrain supplier through our agreement with Eaton to form the Eaton Cummins Automated Transmission Technologies joint venture. This new venture will design, develop and produce the next generation of Automated Transmissions which will be fully integrated with our engine development to deliver up to an additional 7 percent improvement in fuel economy. The joint venture will benefit from the continuing shift away from fully manual transmissions in commercial vehicles, launch new products that will gain market share, leverage Cummins’ strong presence in international markets for growth and generate aftermarket sales.”
Based on the current forecast, Cummins expects full year 2017 revenues to be up 4 to 7 percent, compared to prior guidance of flat to down 5 percent. EBIT is projected to be in the range of 11.75 to 12.5 percent of sales, up from 11 to 11.5 percent. This forecast excludes the impact of the new joint venture with Eaton, which will be consolidated within Cummins’ financial results and is expected to be operational in the third quarter of this year, subject to regulatory approvals.
First quarter 2017 highlights:
- The Company returned $222 million to shareholders in the form of dividends and share repurchase, consistent with its plan to return 50 percent of Operating Cash Flow in 2017
- Cummins was named to Ethisphere’s 2017 list of World’s Most Ethical Companies for a 10th consecutive year by the Ethisphere Institute
- In March, the Company announced its plans to reach a 50 percent intensity reduction in water use at its facilities by 2020
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First quarter 2017 detail (all comparisons to same period in 2016)
Engine Segment
- Sales – $2.0 billion, up 2 percent.
- Segment EBIT – $229 million, or 11.3 percent of sales, compared to 197 million or 10 percent of sales
- Off-highway revenues increased 20 percent primarily due to higher engines sales to global construction markets, while on-highway revenues declined by 2 percent
Distribution Segment
- Sales – $1.6 billion, up 12 percent
- Segment EBIT – $100 million, or 6.1 percent of sales, compared to $87 million or 5.9 percent of sales
- Organic sales increased 6 percent, and revenue from the acquisition completed in the fourth quarter of 2016 added 6 percent
Components Segment
- Sales – $1.3 billion, up 9 percent.
- Segment EBIT – $179 million , or 13.3 percent of sales, compared to $163 million or 13.2 percent of sales
- Strong international revenue growth, primarily in China, more than offset sales declines in North America due to lower commercial truck production
Power Systems Segment
- Sales – $882 million, up 9 percent
- Segment EBIT – $57 million, or 6.5 percent of sales, compared to $46 million, or 5.7 percent of sales
- Increased demand for industrial engines sales primarily for mining and oil & gas markets was the primary driver of revenue growth
