Summary
Cummins Inc. reported a decrease in net sales for the third quarter of 2019, down 3% year-over-year to $5.8 billion. This decline was primarily driven by lower sales in the Engine and Components segments, impacted by reduced demand in global construction and truck markets, alongside unfavorable foreign currency fluctuations. Despite the top-line decrease, net income attributable to Cummins Inc. saw a significant increase of 25% to $1.96 billion for the nine-month period ended September 29, 2019, reaching $12.45 per diluted share. This improvement was fueled by higher gross margins due to lower warranty costs (absence of prior year charges), increased pricing, and lower material costs, as well as a lower effective tax rate and favorable discrete tax items. The company also completed the acquisition of Hydrogenics Corporation, bolstering its presence in the electrified power sector. However, ongoing investigations into the company's emissions certification processes for pick-up truck applications present a potential risk, with an uncertain but possible material adverse impact on future results.
Financial Highlights
56 data points| Revenue | $5.77B |
| Cost of Revenue | $4.27B |
| Gross Profit | $1.49B |
| R&D Expenses | $242.00M |
| SG&A Expenses | $600.00M |
| Operating Income | $699.00M |
| Interest Expense | $26.00M |
| Net Income | $622.00M |
| EPS (Basic) | $3.99 |
| EPS (Diluted) | $3.97 |
| Shares Outstanding (Basic) | 155.90M |
| Shares Outstanding (Diluted) | 156.60M |
Key Highlights
- 1Net sales for the third quarter of 2019 decreased by 3% to $5.8 billion compared to the same period in 2018, primarily due to weaker demand in the Engine and Components segments.
- 2For the nine months ended September 29, 2019, net income attributable to Cummins Inc. increased by 25% to $1.96 billion, with diluted earnings per share rising to $12.45.
- 3Gross margin improved significantly for the nine-month period, increasing by 2.1 percentage points to 25.9% of sales, driven by lower warranty costs (absence of significant 2018 charges), improved pricing, and reduced material costs.
- 4The company acquired an 81% interest in Hydrogenics Corporation in September 2019 for $235 million, expanding its Electrified Power segment capabilities.
- 5Operating cash flow for the first nine months of 2019 saw a substantial increase of $955 million to $2.34 billion, largely due to higher net income and improved working capital management.
- 6Cummins Inc. continues its share repurchase program, spending $806 million in the first nine months of 2019 and increasing its quarterly dividend by 15% in July 2019.
- 7The company is undergoing a formal internal review of its emissions certification process for pick-up truck applications, cooperating with regulatory agencies, which carries an undisclosed but potential material adverse risk.