) posted a sharp 39.5% fall in earnings to $1.44 per share in the
first quarter of 2013 from $2.38 in the same quarter of 2012 (all
excluding special items), missing the Zacks Consensus Estimate of
Net earnings nearly halved to $271 million from $455 million in
the first quarter of 2012. Lower earnings were attributable to
weaker demand in the company's most major geographies and end
Revenues in the quarter dipped 12% to $3.9 billion, which was
marginally lower than the Zacks Consensus Estimate of $4.0
billion. Revenues in North America dropped 15% while
international revenues decreased 10% during the quarter.
Cummins' Engine segment experienced the most significant decline
in demand during the quarter with an 18% fall in unit volumes.
Shipments of high horsepower engines ebbed 24% due to weakness in
mining, oil and gas and power generation markets.
Earnings before interest and taxes (EBIT) were $437 million or
11.1% of sales, compared with $658 million or 14.7% a year ago.
Revenues from the Engine segment went down 19% to $2.3 billion.
The decline in revenues was attributable to lower demand in North
American heavy duty truck, oil and gas, and bus markets and fall
in global mining. The segment EBIT plunged 48.8% to $195 million,
or 8.5% of sales, compared with $381 million or 13.3% in the
Revenues from the Component segment slipped 7% to $1.0 billion
due to lower on-highway demand in North America. EBIT declined
16.8% to $119 million, or 11.7% of sales, compared with $143
million or 13.0% in the prior-year quarter.
Revenues from the Power Generation segment tumbled 4% to $746
million due to lower demand in Europe, Brazil and China,
partially offset by stronger revenues in North America, India and
Africa. Segment EBIT fell 32.9% to $51 million, or 6.8% of sales,
compared with $76 million or 9.7% a year ago.
Revenues from the Distribution segment scaled down 11% to $778
million, driven by weaker demand in the construction market in
Europe, the oil and gas market in North America and a reduction
in orders for power generation in Asia Pacific and the Middle
East. However, segment EBIT upped 1.1% to $95 million, or 12.2%
of sales, compared with $94 million or 12.1% in the previous
Cummins had cash and cash equivalents of $1.5 billion as of Mar
31, 2013, up from $1.4 billion at the end of 2012. Long-term debt
increased to $790 million as of Mar 31, 2013, translating into a
long-term debt-to-capitalization ratio of 10.6%, from $759
million or 10.3% at the end of 2012.
Cash flow from operating activities improved significantly to
$428 million from $21 million in the first quarter of 2012, due
to many factors such as lower inventories, higher accounts
payable and lower accounts and notes receivable. Capital
expenditures declined to $114 million from $126 million in the
first quarter of 2012.
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Cummins expects revenues to be flat to down 5% in 2013. The
company also expects EBIT margin between 13% and 14% for the
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, the company retains
a Zacks Rank #3 (Hold).
Other stocks that are performing well in the industry include
Tower International, Inc.
STRATTEC Security Corporation
). They carry a Zacks Rank #1 (Strong Buy).