Cummins (CMI) Q4 Earnings & Sales Top Estimates, Down Y/Y

Cummins Inc. CMI reported earnings of $2.56 per share in fourth-quarter 2019, surpassing the Zacks Consensus Estimate of $2.42. Higher-than-expected contribution from the Components segment led to the outperformance. Segmental EBITDA (including restricting costs) came in at $189 million, topping the consensus mark of $181 million.

The bottom line, however, declined from earnings of $3.63 a share recorded in fourth-quarter 2018. In the reported quarter, net income attributable to the company was $300 million compared with $579 million in the prior-year period.

Its revenues declined 8.9% year over year to $5.57 billion in the reported quarter. However, revenues beat the Zacks Consensus Estimate of $5.33 billion.

Earnings before interest, taxes, depreciation and amortization (EBITDA) declined to $563 million (10.1% of sales) from $682 million (11.2% of sales) recorded in the prior-year quarter.

Cummins Inc. Price, Consensus and EPS Surprise

 

Cummins Inc. Price, Consensus and EPS Surprise

Cummins Inc. price-consensus-eps-surprise-chart | Cummins Inc. Quote

Segmental Performance

Sales for the Engine segment declined 15.3% year over year to $2,284 million. The segment’s EBITDA (excluding restricting actions) declined to $277 million (12.1% of sales) from $393 million (14.6% of sales) a year ago. Decline in global demand in truck and construction markets resulted in lower on-and off-highway revenues.

Sales for the Distribution segment totaled $2,038 million, down from $2,050 million recorded in the year-ago period. While revenues from North America remained unchanged year over year, international sales declined 1%. The segment’s EBITDA rose to $164 million (8% of sales) from $140 million (6.8% of sales) a year ago.

Sales for the Components segment declined 12% from the prior-year quarter to $1,557 million. The segment’s EBITDA was $209 million (13.4% of sales) compared with the year-ago quarter figure of $278 million (15.7% of sales).Sales in North America and International markets declined 13% and 11% year over year, respectively.

Sales for the Power Systems segment declined 12% from the year-ago quarter to $1,054 million. The segment’s EBITDA declined to $55 million (5.2% of sales) in fourth-quarter 2019 from $123 million (10.3% of sales) in the year-ago period. In addition to lower revenues, the decline in EBITDA is also attributed to a $15-million charge related to a planned exit of a business in Africa.

Sales for the New Power segment were $18 million. The segment recorded EBITDA loss of $50 million.

Financial Position

Cummins’ cash and cash equivalents were $1,129 million as of Dec 31, 2019, down from $1.3 billion in the corresponding period of 2018. Long-term debt totaled $1,576 million. Its debt-to-capital ratio stands at 15.6%.

Outlook

For 2020, Cummins now projects revenue decline of 8-12%. The bleak guidance is attributed to lower truck production in North America, India, Brazil, China, India and Europe. Decline in demand in off-highway markets — including construction and mining markets — is likely to limit revenues. EBITDA is now expected to be 14.2-15.2% of sales. Notably, the company anticipates to return 75% of operating cash flow to its shareholders in the form of dividends and share repurchases.

Zacks Rank & Stocks to Consider

Cummins currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Auto-Tires-Trucks sector include Gentherm Inc. THRM, Gentex Corporation GNTX and SPX Corporation SPXC. While Gentherm flaunts a Zacks Rank #1 (Strong Buy), Gentex and SPX Corp carry a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gentherm has a projected earnings growth rate of 20.6% for the current year. Its shares have gained 9.8% over the past year.

Gentex has an estimated earnings growth rate of 7.3% for 2020. The company’s shares have appreciated 45.8% in a year’s time.

SPX Corp has an expected earnings growth rate of 8.1% for the current year. The stock has rallied 60% in the past year.

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