Cummins diversification strategy proves successful in first quarter

Cummins Inc announced strong first-quarter 2007 earnings, led by significant sales growth in almost every market.

The heavy-duty truck market — still the company's largest — declined as expected, due to lower truck sales resulting from new diesel emissions standards. However, results from Cummins' other operations led the company to higher sales and net income for the quarter.

For the quarter, the company reported sales of $2.82 billion, up 5.2 percent from $2.68 billion during the same period in 2006. Net income of $143 million increased 5.9 percent from $135 million, due to the company's focus on strengthening its balance sheet and lowering costs.

Based on the company's first-quarter results and updated forecast for the rest of the year, Cummins has increased its full-year profit guidance to $6.00-$6.50 a share, up from $5.50-$5.75 a share.

Cummins Power Generation continued its strong performance by reporting record sales and Segment EBIT during the quarter. The business saw a significant increase in demand for its commercial generator sets and alternators around the world — most notably in North America, India, and the Middle East. Consumer sales also improved and more growth is expected in future quarters from sales of portable generator sets and auxiliary power units for commercial trucks.

The company's distribution business performed well during the quarter, with Segment EBIT rising 26 percent from the same period in 2006 to $39 million. The segment enjoyed strong gains for engine sales in Europe, for generator sets in Europe and the South Pacific, and for parts in Europe. Additionally, income from the company's distributor joint ventures nearly doubled, driven in part by an increase in orders for power generation equipment in North America.

Capital spending for both the company and its manufacturing joint ventures is expected to increase significantly in 2007, with the majority going to support growth in current products or expansion into new products.

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