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Cummins' (CMI) Q3 Earnings & Sales Top Estimates, Down Y/Y

Cummins Inc. CMI reported third-quarter 2020 earnings of $3.57 per share, which surpassed the Zacks Consensus Estimate of $2.41. Higher-than-expected contribution from Distribution, Engine and Components Systems segments led to the outperformance. EBITDA from the said segments came in at $182 million, $382 million and $261 million, which topped the consensus mark of $175 million, $241 million and $176 million, respectively.

The bottom line, however, declined from third-quarter 2019 earnings of $3.83 a share amid coronavirus woes. Cummins’ revenues also declined 11.3% year over year to $5,118 million. However, revenues beat the Zacks Consensus Estimate of $4,473.1 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 13% year over year to $2,112 million. The segment’s EBITDA rose to $382 million (accounting for 18.1% of sales) from $341 million (14.1% 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 $1,721 million, down 14% year over year. Revenues from North America declined 18% and international sales were down 5% from the year-ago quarter. The segment’s EBITDA came in at $182 million (10.6% of sales), reflecting a decline from $186 million (9.3% of sales) a year ago amid lower demand across all lines of business.

Sales for the Components segment declined 7% from the prior-year quarter to $1,541 million. The segment’s EBITDA was $261 million (16.9% of sales) compared with the year-ago figure of $286 million (17.3% of sales). While sales in North America markets declined 24%, international sales climbed 26% year over year amid higher demand from China and India.  

Sales for the Power Systems segment declined 13% from the year-ago quarter to $981 million. The segment’s EBITDA declined to $101 million (10.3% of sales) from $158 million (14% of sales) in the year-ago period. Power generation and industrial revenues fell 7% and 21%, 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 $18 million. The segment recorded EBITDA of negative $40 million amid high product and technology-related expenses. 

Cummins’ cash and cash equivalents were $2,967 million as of Sep 27, 2020, up from $1,129 million on Dec 31, 2019. Long-term debt totaled $3,609 million, up from $1,576 million on Dec 31, 2019.

The firm expects fourth-quarter 2020 revenues to be on par with the third quarter level. Two weeks ago, Cummins announced a 3% hike in quarterly payout, marking an annual increase in dividend for the 11th consecutive year.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks from the auto space include Lear Corporation LEALCI Industries LCII and BRP Inc DOOO, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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