Independent engine maker Cummins Inc. notched gains in second-quarter net income and revenue, pointing to higher demand for trucks and construction equipment in North America and China as well as stronger sales to mining and oil and gas customers, according to the company.
For the period ended July 2, net income rose to $424 million, or $2.53 cents per diluted share, compared to $406 million, or $2.40, the Columbus, Ind.-based company said. The financial market consensus was for earnings of $2.58, according to Jamie Cook, an analyst with Credit Suisse.
“We delivered strong revenue growth in all four operating segments in the second quarter due to improving conditions in a number of important markets where we also have leading share,” Cummins Chairman and CEO Tom Linebarger said in a statement. “Earnings increased due to solid operational performance, partially offset by higher warranty costs that resulted in second-quarter EBIT [earnings before interest and taxes] that was below our expectations.”
Cummins noted its current portion of accrued product warranty was $392 million, an 18% increase compared with $333 million on Dec. 31, the end of its full-year 2016 period. It did not provide further details in its earnings statement.
Revenue rose to $5.1 billion, compared to $4.5 billion in the 2016 second quarter. North American revenue increased 13% and international sales grew 11% due to strong demand in China and India, the company said.
Total engine sales in the quarter rose 15% to $2.3 billion, compared with a year earlier.
In the engine segment, on-highway revenues increased by 14%, and off-highway revenues by 20%, primarily due to increased demand in global truck and construction markets, Cummins said.
Also, Cummins noted that Aug. 1 — the day of its earnings release — marked the first day of operations for the Eaton Cummins Automated Transmission Technologies joint venture and explained the financial results will be consolidated within Cummins’ components segment.
Cummins and Eaton each own 50% of the global joint venture, which will design, manufacture, sell and support all future medium-duty and heavy-duty automated transmissions for the commercial vehicle market, according to Cummins.
Eaton’s current medium-duty automated transmission, Procision, and next-generation heavy-duty automated transmissions will be part of the business, which also will market, sell and support Eaton’s current generation of automated heavy-duty transmissions to OEM customers in North America, Cummins said.
Year-to-date, net income climbed to $820 million, or $4.88, compared with $727 million, or $4.26, in the 2016 period. Revenue increased to $5.1 billion, compared with $4.5 billion a year earlier.
“As a result of stronger than expected orders in truck and construction markets in North America and China, and improving demand from global mining customers, we have raised our 2017 full year outlook,” Linebarger said.
Cummins expects full-year 2017 revenues to be up between 9% and 11% compared to the prior forecast of up between 4% and 7%. This forecast excludes the impact of its new Eaton Cummins Automated Transmission Technologies joint venture.