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Cummins (CMI) Earnings and Revenues Miss Estimates in Q3

Zacks Equity Research

Cummins Inc. CMI reported earnings of $3.83 per share in third-quarter 2019, missing the Zacks Consensus Estimate of $3.84. Lower-than-expected profits from the Engine segment led to the underperformance. Earnings before interest & tax for the segment were $341 million, missing the Zacks Consensus Estimate of $403 million.

In the reported quarter, net income attributable to the company was $622 million compared with net income of $692 million in the prior-year quarter.

Its revenues declined 3% year over year to $5.76 billion in the reported quarter. Moreover, revenues missed the Zacks Consensus Estimate of $5.83 billion.

Earnings before interest, taxes, depreciation and amortization (EBITDA) declined to $958 million (16.6% of sales) from $983 million (16.5% of sales) recorded in the prior-year quarter.

Cummins Inc. Price, Consensus and EPS Surprise

 

Cummins Inc. Price, Consensus and EPS Surprise

Cummins Inc. price-consensus-eps-surprise-chart | Cummins Inc. Quote

Segmental Performance

Sales for the Engine segment declined 11% year over year at $2.4 billion. The segment’s EBITDA declined to $341 million (14.1% of sales) from $405 million (14.9% of sales) a year ago.

Sales for the Distribution segment grew 4% to $2 billion. The segment’s EBITDA rose to $186 million (9.3% of sales) from $155 million (8% of sales) a year ago.

Sales for the Components segment declined 6% to $1.7 billion. The segment’s EBITDA was $286 million (17.3% of sales) compared with the year-ago quarter figure of $288 million (16.4% of sales).

Sales for the Power Generation segment improved 2% to $1.1 billion. The segment’s EBITDA declined to $158 million (14% of sales) in third-quarter 2019 from $163 million (14.7% of sales) in the year-ago quarter.

Sales for the Electrified Power segment were $9 million. The segment witnessed EBITDA loss of $36 million.

Financial Position

Cummins’ cash and cash equivalents were $1.6 billion as of Sep 29, 2019, up from $1.3 billion as of Dec 31, 2018. Long-term debt totaled $1.62 billion as of Sep 29, 2019, compared with $1.60 as of Dec 31, 2018.

Outlook

For 2019, Cummins now projects revenue decline of 2%. Initially, it expected revenues to remain at the same level as 2018. The company revised projection downward on lower truck production in North America, India, Brazil and Europe, and a decline in demand in off-highway markets, including North America construction and global mining. EBITDA is now expected to be 15.9-16.3% (compared with previously mentioned 16.25-16.75%) on lower volume and the Hydrogenics acquisition. Further, the company anticipates returning 75% of operating cash flow to shareholders in forms of dividends and share repurchases.

Zacks Rank & Stocks to Consider

Cummins currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Auto-Tires-Trucks sector are BRP Inc DOOO and Sonic Automotive, Inc SAH, currently sporting a Zacks Rank #1 (Strong Buy), and Lithia Motors, Inc LAD, carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BRP has an expected earnings growth rate of 18.4% for 2019.

Sonic Automotive has an estimated earnings growth rate of 37.8% for 2019.

Lithia Motors has an estimated earnings growth rate of 15.1% for 2019.

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