Cummins (CMI) Q2 Earnings & Sales Top Estimates, Decline Y/Y

Cummins Inc. CMI reported second-quarter 2020 earnings of $1.95 per share, which surpassed the Zacks Consensus Estimate of $0.85. Higher-than-expected contribution from Distribution, Engine and Power Systems segments led to the outperformance. EBITDA from the said segments came in at $160 million, $150 million and $91 million, which topped the consensus mark of $101 million, $85 million and $76 million, respectively.

The bottom line, however, declined from second-quarter 2019 earnings of $4.27 a share amid coronavirus woes. Cummins’ revenues also declined 38% year over year to $3,852 million. However, revenues beat the Zacks Consensus Estimate of $3,569 million.

Cummins Inc. Price, Consensus and EPS Surprise

Cummins Inc. Price, Consensus and EPS Surprise

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

Key Takeaways

Sales for the Engine segment declined 47.3% year over year to $1,423 million. The segment’s EBITDA declined to $150 million (accounting for 10.5% of sales) from $416 million (15.4% of sales) a year ago. Decline in global demand in truck and construction markets resulted in lower on- and off-highway revenues than the prior-year quarter. Sales slid in all regions served, apart from China.

Sales for the Distribution segment totaled $1,605 million, down 20.8% year over year. Revenues from North America declined 25% and international sales were down 12% from the year-ago quarter. The segment’s EBITDA fell to $160 million (10% of sales) from $172 million (8.5% of sales) a year ago amid lower demand and unfavorable forex translations.

Sales for the Components segment declined 37.7% from the prior-year quarter to $1,150 million. The segment’s EBITDA was $141 million (12.3% of sales) compared with the year-ago figure of $297 million (16.1% of sales). Sales in North America and international markets declined 55% and 9% year over year, respectively. Weak demand in Brazil, Europe and India weighed on international sales. Nonetheless, sales surged 63% year over year in China on the back of record level of truck production.

Sales for the Power Systems segment declined 35.4% from the year-ago quarter to $777 million. The segment’s second-quarter 2020 EBITDA declined to $91 million (11.7% of sales) from $173 million (14.4% of sales) in the year-ago period. Power generation and industrial revenues fell 37% and 33%, respectively, from a year ago. Lower demand in mining and oil/gas markets weighed on the segment’s sales.

Sales for the New Power segment were $10 million. The segment recorded EBITDA of negative $38 million amid high product and technology-related expenses. 

Cummins’ cash and cash equivalents were $1,751 million as of Jun 28, 2020, up from $1,129 million on Dec 31, 2019. Long-term debt totaled $1,639 million, up from $1,576 million on Dec 31, 2019.

While the firm expects third-quarter sales to improve sequentially, coronavirus-led uncertainty still looms large. On account of this, Cummins refrained from providing any forecast for full-year 2020.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks in the auto sector include Sonic Automotive Inc. SAH, Lithia Motors LAD and AutoNation AN, each carrying a Zacks Rank of 1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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