Cummins Q1 Net Income, Revenue Fall
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Cummins Inc. reported first-quarter net income and revenue fell as key domestic and global markets weakened as the novel coronavirus spread.
Those detrimental conditions, the company said, are expected to persist in the second quarter and beyond.
For the first quarter, ended March 31, net income dropped 30% to $511 million, or $3.41 per diluted share, compared with $663 million, or $4.20 per diluted share, in the same period last year.
Net income included a benefit of $35 million, 23 cents per diluted share, from recent changes to tax law in India, according to the Columbus, Ind.-based company.
Revenue fell by $1 billion to $5 billion compared with a year earlier. Lower truck production in North America and weaker demand in global construction, mining, and power generation markets drove the majority of the revenue decrease.
Also, currency negatively impacted revenue by 1% primarily due to a stronger U.S. dollar.
Overall, sales in North America declined by 16% while international revenue decreased by 17% led by declines in Europe, Asia Pacific, Latin America, India, and China.
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Engine-related revenue fell to $2.2 billion compared with $2.7 billion a year earlier.
On-highway engine revenue decreased to $750 million compared with $979 million a year earlier, and off-highway revenue dropped to $437 million compared with $571 million in the 2019 period, primarily due to decreased global demand in truck and construction markets. Medium-duty truck and bus engine revenue fell to $618 million compared with $721 million a year earlier.
Revenue in the component segment (its second-largest behind engines including emission, filtration, turbo, electronics and fuel systems, and automated transmission products) fell to $1.5 billion compared with $1.9 billion a year earlier.
“We delivered strong profitability in the first quarter, supported by the commitment of our employees to serve our customers and the benefit of cost reduction actions we initiated in the second half of 2019. Amidst the unprecedented COVID-19 pandemic, the health and safety of our employees and the communities in which we operate is our top priority,” Chairman and CEO Tom Linebarger said.
“Our teams are working hard to support the global economy, leveraging our flexibility and strong supplier network to help our customers deliver essential products and support response efforts. Given the significant impact the pandemic will have on demand across our industry in the second quarter and beyond, we are continuing to take actions to reduce cost and boost our already strong liquidity,” Linebarger continued.
Cummins Inc. announced in early April it temporarily closed until May 4 its manufacturing facilities in southern Indiana as the company continues to adjust worker wellbeing and output amid the coronavirus pandemic. The step came a day after it put in place pay cuts throughout the company.
Other U.S. operations, including its plant in Jamestown, N.Y. — which the company calls the largest heavy-duty diesel engine plant in the world — remain open, a spokesman told Transport Topics April 4. Cummins earlier halted production at a remanufacturing facility in Memphis, Tenn.
Linebarger
Cummins “handily beat our and consensus estimates” for earnings per share and revenue, Cowen Inc. financial analyst Matthew Elkott wrote in a note. “Heavy-duty and medium-duty engine shipments exceeded our forecasts, while light-duty missed.”
Total engine shipments in the quarter were 136,400 units down from 169,300 a year earlier and above Cowen’s estimate of 128,000 units. Heavy-duty engine shipments declined 24% to 25,800, well above Cowen’s estimate of 17,000 units. Medium-duty engine shipments fell 23% to 61,200, also landing above Cowen’s estimate of 60,000 units. Light-duty engine shipments declined 12% to 49,400, below Cowen’s estimate of 51,000 units.
“Our new X15 Efficiency Series engine, which meets 2021 greenhouse gas standards and provides improved fuel economy, is being well received by customers,” Linebarger said during the earnings conference call.
“We also look forward to launching the low weight X12 platform on the Freightliner Cascadia Day and sleeper cab chassis, which customers can order today for delivery later this year,” he said.
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