Summary
For the first quarter of 2018, Cummins Inc. (CMI) reported a significant increase in net sales, up 21% year-over-year to $5.6 billion, driven by broad-based demand across its key segments, particularly in North America and international markets. Despite the revenue growth, consolidated net income attributable to Cummins Inc. decreased by 18% to $325 million, translating to diluted earnings per share of $1.96, down from $2.36 in the prior year period. This decline was primarily attributable to a substantial increase in campaign costs related to engine aftertreatment components and unfavorable discrete tax items stemming from the Tax Cuts and Jobs Act of 2017. The company's operational performance showed mixed results. While gross margin dollars increased, gross margin as a percentage of sales declined due to higher campaign costs. Operating expenses, including R&D and SG&A, also rose due to increased headcount and investments. The company highlights positive trends for the remainder of 2018, including strong demand in North American truck markets and improving global construction markets, balanced by challenges like expected declines in China's truck market.
Financial Highlights
51 data points| Revenue | $5.57B |
| Cost of Revenue | $4.37B |
| Gross Profit | $1.20B |
| R&D Expenses | $210.00M |
| SG&A Expenses | $577.00M |
| Operating Income | $530.00M |
| Interest Expense | $24.00M |
| Net Income | $325.00M |
| EPS (Basic) | $1.97 |
| EPS (Diluted) | $1.96 |
| Shares Outstanding (Basic) | 164.90M |
| Shares Outstanding (Diluted) | 165.70M |
Key Highlights
- 1Net sales increased by 21% to $5.6 billion in Q1 2018 compared to Q1 2017.
- 2Consolidated Net Income attributable to Cummins Inc. decreased by 18% to $325 million ($1.96 EPS) in Q1 2018, down from $396 million ($2.36 EPS) in Q1 2017.
- 3A significant factor in the net income decrease was a $187 million charge related to engine aftertreatment component degradation campaigns.
- 4The effective tax rate for Q1 2018 was negatively impacted by $78 million in discrete tax items related to the Tax Cuts and Jobs Act of 2017.
- 5The 'Components' segment saw the strongest sales growth at 30%, followed by 'Power Systems' at 22%.
- 6Cash flow from operations turned negative at ($117 million) in Q1 2018, compared to positive $379 million in Q1 2017, largely due to increased working capital needs.
- 7Cummins is investing in its new Electrified Power segment, which incurred an EBITDA loss of $10 million in its first quarter of reporting.