10-KPeriod: FY2018

CUMMINS INC Annual Report, Year Ended Dec 31, 2018

Filed February 11, 2019For Securities:CMI

Summary

Cummins Inc. reported strong financial performance for the fiscal year ended December 31, 2018, with net sales reaching $23.8 billion, a 16% increase year-over-year. This growth was driven by increased demand across all operating segments, particularly in North American heavy-duty and medium-duty truck markets, as well as global construction and mining sectors. The company's net income attributable to Cummins Inc. significantly improved to $2.14 billion, or $13.15 per diluted share, compared to $999 million, or $5.97 per diluted share, in the prior year. This improvement was boosted by higher sales, favorable pricing, improved product mix, and the impact of the 2017 Tax Cuts and Jobs Act, though partially offset by a substantial engine system campaign charge. The company's diversified business model, with five complementary operating segments (Engine, Distribution, Components, Power Systems, and Electrified Power), contributed to its resilience. Cummins continues to invest in future technologies, including its Electrified Power segment, which is in its early stages. Despite a positive outlook for many of its markets in 2019, the company anticipates headwinds from trade tariffs, particularly with China, and uncertainties surrounding Brexit, which could impact European operations.

Financial Highlights

57 data points
Beta

Revenue

$23.77B

24.1% Gross Margin

Net Income

$2.14B

9.0% Net Margin

EPS (Diluted)

$13.15

Total Assets

$19.06B

Cash & Equivalents

$1.30B

Free Cash Flow

$1.67B

Financial Statements
Beta
Revenue$23.77B
Cost of Revenue$18.03B
Gross Profit$5.74B
R&D Expenses$902.00M
SG&A Expenses$2.44B
Operating Income$2.79B
Interest Expense$114.00M
Net Income$2.14B
EPS (Basic)$13.20
EPS (Diluted)$13.15
Shares Outstanding (Basic)162.20M
Shares Outstanding (Diluted)162.80M

Key Highlights

  • 1Net sales increased by 16% to $23.8 billion in 2018, driven by broad-based demand across all operating segments.
  • 2Net income attributable to Cummins Inc. more than doubled to $2.14 billion, with diluted EPS rising to $13.15.
  • 3The Engine segment saw an 18% sales increase, fueled by strong North American truck market demand and global construction markets.
  • 4The Components segment experienced a 22% sales increase, benefiting from higher demand in emission solutions and turbo technologies, along with the inclusion of the automated transmission business.
  • 5Cummins continues to invest in research and development, with R&D expenses increasing by $148 million, notably in the Electrified Power segment.
  • 6The company repurchased $1.1 billion of its common stock in 2018, reflecting a commitment to returning capital to shareholders.
  • 7Despite positive trends, challenges include cost increases from trade tariffs and uncertainty related to Brexit.

Frequently Asked Questions

Cummins Inc. demonstrated strong financial performance in 2018, with net sales increasing 16% to $23.8 billion and net income attributable to Cummins Inc. rising to $2.14 billion, or $13.15 per diluted share. This growth was supported by robust demand across its diverse segments and improved profitability.

All operating segments saw higher sales in 2018. The Components segment had the strongest percentage growth at 22%, followed by the Engine segment at 18% and the Power Systems segment at 14%. The Distribution segment also saw an 11% increase in sales.

Key risks include a potential slowdown in major markets (particularly North America and China), increased costs due to trade tariffs, the ongoing uncertainty surrounding Brexit which could affect European operations, and the long-term impact of evolving technologies like electrification, which may reduce demand for traditional diesel engines. The company also faces risks related to supply chain disruptions, competition, and foreign currency fluctuations.

Cummins is making significant investments in research and development, with R&D expenses increasing notably in 2018. A key focus is the development of the Electrified Power segment, which includes advancements in electric and hybrid powertrain systems for commercial vehicles. The company also continues to innovate within its core Engine, Components, and Power Systems segments to meet evolving customer needs and regulatory standards.