) posted earnings per share of $1.94 (excluding special items) in
the fourth quarter of 2013, compared with $1.93 reported in the
year-ago quarter. However, earnings lagged the Zacks Consensus
Estimate of $1.98 per share. Net income came in at $362 million
compared with $365 million in the fourth quarter of 2013.
Revenues in the quarter rose 6.9% year over year to $4.6 billion,
mainly driven by higher revenues in North America, China and
Brazil partially offset by poor sales in Mexico, India and
Australia. Revenues surpassed the Zacks Consensus Estimate of
Operating income increased about 18.9% to $553 million from $465
million a year ago. Earnings before interest and taxes (EBIT)
increased 6.4% to $566 million or 12.3% of sales, compared with
$532 million or 12.4% a year ago.
Fiscal 2013 Performance
Cummins' adjusted earnings dropped 11.9% year over year to $7.52
per share for full-year 2013, missing the Zacks Consensus
Estimate of $7.58. Revenues for full-year 2013 decreased
marginally to $17.30 billion from $17.33 billion in 2012.
Meanwhile, revenues surpassed the Zacks Consensus Estimate of
$16.9 billion. Revenues benefited from improvement in the
Components business, increased share in the North American
medium-duty truck market and favorable impacts from distributor
acquisitions. This was offset by weakness in global mining
markets, international power generation and the North American
heavy-duty truck market.
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Sales in the Engine segment rose 2% to $2.6 billion due to
increased demand for construction equipment in international
markets and higher demand for medium duty trucks in North
America. This was partially offset by weakness in global mining
markets and lower demand in the North American bus market. The
segment's EBIT decreased to $235 million or 9.2% of sales,
compared with $272 million or 10.9% a year ago.
Sales in the Components segment grew 21% to $1.1 billion on the
back of strong on-highway demand in Europe, China and North
America. This segment's EBIT surged 66.7% to $140 million, or
12.3% of sales, versus $84 million or 8.9% in the prior-year
Sales in the Power Generation segment went down 1% to $759
million due to weak revenues in Europe and India partially offset
by higher demand in North America and the Middle East. The
segment's EBIT fell 14.8% to $46 million, or 6.1% of sales,
compared with $54 million or 7.1% in the fourth quarter of 2012.
Sales in the Distribution segment rose 18% to $1.1 billion
(excluding acquisitions) on enhanced demand for power generation
equipment and parts and services in the U.S and benefits from
acquisitions. The segment's EBIT increased 9.2% to $107 million,
or 10% of sales, versus $98 million or 10.8% a year ago.
Cummins' cash and cash equivalents increased to $2.7 billion as
of Dec 31, 2013 compared with $1.4 billion at the end of 2012.
Debt increased to $1.69 billion as of Dec 31, 2013 from $714
million as of Dec 31, 2012. Consequently, debt to capitalization
ratio was 18.4% as of Dec 31, 2013 compared with 9.8% as of Dec
In 2013, Cummins' net operating cash flow surged to $2.1 billion
from $1.5 billion in 2012. Capital expenditures in 2013 declined
to $676 million from $690 million in the previous year. Cummins
repurchased 3.3 million shares for $381 million during 2013,
compared with $256 million worth of shares a year ago.
For 2014, Cummins expects revenues to increase 4% to 8%. The
company also expects its 2014 EBIT margin to be in the
12.75%-13.25% range. Cummins also anticipates that earnings will
increase at a faster pace than revenues.
Cummins Inc. is a leading worldwide designer, manufacturer and
distributor of diesel and natural gas engines, electric power
generation systems, and engine-related components, fuel systems,
controls and air handling systems. Currently, CMI retains a Zacks
Rank #2 (Buy).
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