COLUMBUS, Ind. — Cummins, Inc. (NYSE: CMI) today reported results for the third quarter of 2019.
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 the 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 percent 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 percent 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
Third-quarter 2019 detail (all comparisons to the same period in 2018)
Engine Segment
- Sales—$2.4 billion, down 11 percent.
- Segment EBITDA—$341 million, or 14.1 percent of sales, compared to $405 million or 14.9 percent of sales.
- The company recorded a $33 million charge related to the decision to cease production of its 5-liter ISV engine for the US pickup market by the end of this year.
- On-highway revenues decreased 9 percent and off-highway revenues decreased by 20 percent.
- North America revenues decreased by 6 percent, due to lower demand in heavy-duty truck and construction markets, while international revenues declined 25 percent primarily due to lower demand in China.
Distribution Segment
- Sales—$2.0 billion, up 4 percent.
- Segment EBITDA—$186 million, or 9.3 percent of sales, compared to $155 million or 8.0 percent of sales.
- Revenues in North America increased by 3 percent and international sales were up 5 percent.
- Strong demand for power generation equipment in North America, especially data centers, was partially offset by lower demand in oil and gas markets, and the unfavorable impact from a stronger U.S. dollar, which impacted sales by 1 percent.
Components Segment
- Sales—$1.7 billion, down 6 percent.
- Segment EBITDA—$286 million, or 17.3 percent of sales, compared to $288 million or 16.4 percent of sales.
- Revenues in North America increased by 2 percent, while international sales declined by 18 percent due to lower demand in Europe, India and China.
Power Systems Segment
- Sales—$1.1 billion, up 2 percent.
- Segment EBITDA—$158 million, or 14.0 percent of sales, compared to $163 million or 14.7 percent of sales.
- Industrial revenues increased 3 percent, while power generation revenues grew 2 percent.
Electrified Power Segment
- Sales—$9 million
- Segment EBITDA loss—$36 million
About Cummins
Cummins, Inc., a global technology leader, is a corporation of complementary business segments designing, manufacturing, distributing and servicing a broad portfolio of power solutions. The company’s products range from diesel and natural gas engines to hybrid and electric platforms, as well as related technologies, including transmissions, battery systems, fuel systems, controls, air handling, filtration, emission solutions, electrical power generation systems, hydrogen generation, energy storage and fuel cell products.
Headquartered in Columbus, Ind., since its founding in 1919, Cummins employs approximately 62,600 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 customers in approximately 190 countries and territories through a network of approximately 600 company-owned and independent distributor locations, and over 7,600 dealer locations.
In 2018, the company earned about $2.1 billion on sales of $23.8 billion. See how Cummins is powering a world that’s Always On by accessing news releases and more information at https://www.cummins.com/always-on. Follow Cummins on Twitter at www.twitter.com/cummins and on YouTube at www.youtube.com/cumminsinc.
