Summary
Cummins Inc. (CMI) reported strong financial results for the quarter and six months ended June 30, 2018. Net sales surged by 21% in both periods, driven by robust demand across all operating segments, particularly in North America for heavy- and medium-duty trucks, and increased international demand in markets like China and Europe. This top-line growth, combined with improved pricing and lower material costs, led to a significant increase in gross margin. Despite higher R&D expenses, particularly related to the new Electrified Power segment, and a substantial charge for an Engine System Campaign, the company demonstrated a notable improvement in net income and diluted EPS. The company's financial position remains strong, with substantial cash and marketable securities, and access to significant credit facilities. Cummins also continued to return capital to shareholders through dividends and share repurchases. Management provided a positive outlook for the remainder of 2018, expecting continued strength in several key markets, though they noted potential challenges from trade tariffs and a slowdown in the Chinese truck market.
Financial Highlights
55 data points| Revenue | $6.13B |
| Cost of Revenue | $4.39B |
| Gross Profit | $1.44B |
| R&D Expenses | $229.00M |
| SG&A Expenses | $604.00M |
| Operating Income | $803.00M |
| Interest Expense | $30.00M |
| Net Income | $545.00M |
| EPS (Basic) | $3.33 |
| EPS (Diluted) | $3.32 |
| Shares Outstanding (Basic) | 161.30M |
| Shares Outstanding (Diluted) | 161.80M |
Key Highlights
- 1Net sales increased by 21% year-over-year for both the three and six months ended June 30, 2018, reaching $6.1 billion and $11.7 billion, respectively.
- 2Gross margin improved significantly, with an increase of 15% for the quarter and 11% for the six months, driven by higher volumes, improved pricing, and lower material costs.
- 3Net income attributable to Cummins Inc. rose by 29% to $545 million ($3.32 per diluted share) for the quarter and by 6% to $870 million ($5.27 per diluted share) for the six months.
- 4The company incurred a significant charge of $181 million in Q2 2018 for an Engine System Campaign related to an aftertreatment component degradation, impacting gross margin.
- 5Operating segments showed strong growth, with Components, Engine, and Power Systems segments posting double-digit sales increases.
- 6The newly formed Electrified Power segment is investing heavily in R&D, reporting an EBITDA loss of $21 million for the quarter.
- 7Cash from operations decreased to $473 million for the first six months of 2018 from $826 million in the prior year, primarily due to higher working capital requirements.