Summary
Cummins Inc. reported a decrease in net sales and net income for the first quarter of 2016 compared to the same period in 2015. Net sales declined by 9% to $4.3 billion, primarily driven by lower demand across most global markets, particularly in the on-highway, industrial, and power generation segments. This decline was partially offset by increased sales from the consolidation of previously partially-owned North American distributors. Net income attributable to Cummins Inc. fell 17% to $321 million, resulting in diluted earnings per share of $1.87, down from $2.14 in the prior year. The decrease in profitability was attributed to lower gross margins, unfavorable foreign currency fluctuations, and a higher effective tax rate, despite efforts to reduce operating expenses. The company continues its share repurchase program and maintains a strong liquidity position with significant cash and marketable securities.
Financial Highlights
52 data points| Revenue | $4.29B |
| Cost of Revenue | $3.23B |
| Gross Profit | $1.06B |
| R&D Expenses | $166.00M |
| SG&A Expenses | $490.00M |
| Operating Income | $470.00M |
| Interest Expense | $19.00M |
| Net Income | $321.00M |
| EPS (Basic) | $1.87 |
| EPS (Diluted) | $1.87 |
| Shares Outstanding (Basic) | 171.80M |
| Shares Outstanding (Diluted) | 172.00M |
Key Highlights
- 1Net sales decreased by 9% to $4.3 billion for the three months ended April 3, 2016, compared to $4.7 billion in the prior year period, reflecting weaker global demand across most key markets.
- 2Consolidated net income attributable to Cummins Inc. decreased by 17% to $321 million ($1.87 per diluted share) from $387 million ($2.14 per diluted share) year-over-year.
- 3Gross margin as a percentage of sales declined to 24.6% from 25.4%, impacted by lower volumes, unfavorable mix, and foreign currency fluctuations.
- 4Operating cash flow improved to $263 million from $173 million, driven by favorable working capital changes and lower pension contributions.
- 5The company significantly increased share repurchases, with $475 million in total cost for repurchases during the quarter, including an accelerated share repurchase agreement.
- 6Despite revenue challenges, the company generated strong liquidity, with $1.3 billion in cash and marketable securities available at quarter-end.
- 7The company is strategically reorganizing its business segments, combining the Power Generation segment and high horsepower engine business into a new Power Systems segment, effective April 2016.