Cummins' First-Quarter Earnings, Sales Decline
Independent engine maker Cummins Inc. posted diminished first-quarter financial results with declines in sales and net income relative to the same time in 2015, and the North American heavy-duty truck market listed as a contributing factor.
The Columbus, Indiana-based manufacturer earned $321 million, or $1.87 a share, on global revenue of $4.29 billion for the three months ended April 3. In the 2015 quarter, the company made $387 million, or $2.14, on sales of $4.71 billion.
The Wall Street consensus estimate for the most recent quarter was $1.78 a share.
“Lower production in the North American heavy-duty truck market and weak global demand for off-highway and power generation equipment contributed to the reduction in sales,” the company said in its May 3 statement. “Currency negatively impacted revenues by approximately 3% compared to last year, primarily due to a stronger U.S. dollar.”
The engine business is the largest of the company’s four divisions. External sales for the quarter declined to $1.62 billion from $1.89 billion, year-over-year. Operating profit for the most recent quarter was $200 million, or 8.6% of sales, down from $253 million, or 9.7%, a year earlier.
Cummins’ other divisions — distribution, components and power generation — remained profitable.
Quarterly shipments of heavy-duty engines fell 31.4% to 19,700 units from 28,700 in the 2015 first quarter. Revenue from those shipments dropped 16.6% to $631 million from $757 million over the same time.
Shipments of midrange engines increased to 117,100 from 112,400, while medium-duty revenue declined to $549 million from $608 million.
Stock analyst Stephen Volkmann told clients of Jefferies Securities that Cummins is reacting strongly to soft markets for its products.
“The company is clearly taking significant restructuring actions, which resulted in [profit-margin decreases] of just 20%, and were particularly impressive in engines, 20% decremental, where volumes declined 10%," Volkmann said. "The cost-reduction efforts should continue to help limit margin compression, though whether the low 20s decremental margin can be sustained should volumes continue to decline remains an open question.”
