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July 31, 2018 12:15 PM, EDT
Cummins Reports Record Revenue, Earnings Per Share in 2Q
Cummins engine A completed Cummins Inc. diesel truck engine. (Luke Sharrett/Bloomberg News)

Engine maker Cummins Inc. posted record revenue and earnings per share in the second quarter as demand for trucks and construction, mining and power generation equipment all improved.

Net income for the period ended June 30 rose 28% to $545 million, or $3.32 per diluted share. That compared with $424 million, or $2.53, in the year-earlier period.

Revenue hit $6.1 billion, up 21% compared with $5 billion in the 2017 quarter.

Currency favorably impacted revenue by 1%.

Sales in North America improved by 22%, while international revenue increased by 18% led by growth in China, Europe and Latin America, compared with a year earlier.

“As a result of strong customer demand for our products, solid execution from our global manufacturing and supply chain teams and continued focus on cost reduction, the company delivered record quarterly sales and earnings per share in the second quarter,” Chairman and CEO Tom Linebarger said in a statement.

“We are on track to deliver record full-year sales, earnings and cash flow. The company now plans to return 75% of operating cash flow to shareholders in the form of dividends and share repurchases in 2018, up from our previous plan to return 50%,” Linebarger said.

Engine segment revenue from its heavy-duty business was $730 million, and $714 million from medium-duty trucks and buses. Total sales from engines reached $2.05 billion, including off-highway and light-vehicle power plants.

Among the components segment, emissions solutions accounted for $735 million in sales, or about 50% of the segment’s overall sales of $1.4 billion.

Within that segment, its automated transmission joint venture with Eaton Corp. recorded sales of $141 million and an EBITDA (earnings before interest taxes and depreciation) loss of $4 million in the second quarter.

The two companies announced their 50-50 joint venture — Eaton Cummins Automated Transmission Technologies, which includes transmissions for medium- and heavy-duty trucks — in April 2017. Its first core product is the Endurant, a 12-speed automated transmission.

During the second quarter, Cummins finalized plans for a product campaign to ensure the proper performance of an aftertreatment component in 500,000 on-highway products produced between 2010 and 2015 in North America.

The company recorded an additional pretax charge of $181 million in the most recent quarter toward the expected costs of the previously announced issue.

Regulatory agencies have approved the planned actions to execute the campaign, and Cummins has provided in full for the estimated costs, according to the Columbus, Ind.-based company.

At the same time, Cummins continued to maintain its forecast for North American production of heavy-duty trucks at 286,000 units, up 29% compared with 2017.

“We expect our market share to be between 31% and 34%, which is unchanged from our last quarter. However, we now expect to be at the higher end of this range,” Linebarger said.

In the medium-duty truck market, Cummins increased its forecast for industry production to reach 133,000 units, up 13% year-over-year and above its previous forecast of 124,000 units.

“We expect our market share to be in the range of 75% to 78%, an increase from our prior guidance of 72% to 75%,” he said.

Meanwhile, Cummins reiterated its intention to be the leader in electrified power trains for commercial vehicles.

To that end, Cummins in July announced it will acquire Milpitas, Calif.-based Efficient Drivetrains Inc., which develops and produces hybrid and fully electric power solutions for commercial vehicle applications.

“For those of you planning to attend the IAA truck show in Hanover [Germany] in September, you’ll have the opportunity to view a range of Cummins products, including our electrified power trains and commercial vehicles,” Linebarger said.