Cummins Q3 profit jumps 53%, beats estimates

Cummins Inc. (CMI) posted a 53% jump in earnings for the third quarter driven by higher demand in a number of key markets, market share growth and the benefits of cost reduction initiatives. The results exceeded analysts’ expectations. The engine maker maintained its full-year 2018 revenue outlook.

Net income soared 53% to $692 million and earnings jumped 58% to $4.28 per share. The latest quarter results included a $37 million positive impact in discrete tax items of which $34 million was related to US tax reform. Excluding items, earnings were $655 million or $4.05 per share.

The improved demand for trucks, construction, and power generation equipment drove growth in most major markets. This has helped in a 12% growth in revenues for the quarter to $5.94 billion. A weaker Brazilian Real negatively impacted revenues by 1%.

Sales in North America improved by 17% while international revenues increased by 6% led by growth in India, China, Latin America, and Europe.

Higher truck production in North America drove Engine segment sales higher by 17%. Distribution sales rose 10% on strong demand for power generation equipment, oil and gas engines, and growth in parts and service. Higher revenue in North America drove Components sales up by 14%. Power Systems sales increased 5% on higher demand in power generation and oil and gas markets.

Looking ahead into the full year 2018, the company lowered the effective tax rate outlook, excluding discrete items, to 21% from the previous estimate of 23%. Based on the current forecast, Cummins expects 2018 revenues to be up 15% to 17% and EBITDA of 14.8% to 15.2% of sales, unchanged from prior guidance.

The company has completed its previously announced $500 million accelerated share repurchase plan and its board of directors recently authorized a new $2 billion share repurchase plan, which reflects its confidence in long-term performance. Year to date, Cummins has returned $1.4 billion to shareholders in the form of dividends and share repurchase, consistent with its plan to return 75% of operating cash flow in 2018.

Shares of Cummins opened Tuesday’s regular session lower and is trading in the red territory. The stock has fallen over 27% in the past year and over 26% in the year so far.

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