Record Revenues for Cummins

Oct. 25, 2007
Cummins Inc. today reported record revenues and higher earnings for the third quarter, led by quarterly-best sales in three of its four business segments.

Cummins Inc. today reported record revenues and higher earnings for the third quarter, led by quarterly-best sales in three of its four business segments. Given the company’s performance through the first nine months of 2007 and the outlook for the fourth quarter, Cummins remains on pace to meet its earnings guidance of $7.15-$7.65 a share, which would make 2007 the most profitable year in company history.

Sales grew 20 percent to $3.37 billion, from $2.81 billion during the same period in 2006, eclipsing the company’s previous high mark set in the second quarter of 2007. Net income for the third quarter increased 7.6 percent to $184 million, or $1.84 per diluted share, from $171 million, or $1.69 per diluted share in the third quarter last year.

Earnings Before Interest and Taxes (EBIT) rose 3.4 percent to $306 million, or 9.1 percent of sales, from $296 million, or 10.5 percent of sales, in the same period in 2006. Earnings growth was moderated by a downturn at some OEM customers, and the expected higher costs associated with the introduction of new emissions-related products.

“We continue to experience significant growth in most of our markets around the world, and are well-positioned to take advantage of many opportunities for future growth,” said Cummins Chairman and Chief Executive Officer Tim Solso. “Our technology leadership has resulted in a sustainable competitive advantage for Cummins, and we remain focused on producing profitable growth for all our stakeholders.”

In the company’s Engine business, gains in many markets - most notably in the light-duty automotive, medium-duty truck, construction and mining markets - propelled the segment to a 17 percent sales increase compared to the same period last year. That increase came despite continued weakness in the North America heavy-duty truck engine market related to emission regulation changes. The industry forecast for trucks in that market is now approximately 180,000 units for the full year 2007, down almost 50 percent from 2006.

Even though this market is down significantly from the prior year, the company continues to gain market share, reflecting customer preference for Cummins’ emissions-compliant products. Through August, the company held a market-leading 36 percent share of the North America Class 8 truck engine market, compared to 27 percent at the end of 2006.

The company’s Power Generation business reported record sales of $776 million in the quarter, a 24 percent increase from the third quarter of 2006, and saw Segment EBIT jump 46 percent over the same period, on strong volumes and improved pricing.

The components segment - which includes the filtration, exhaust aftertreatment, turbocharger and fuel systems businesses - reported significantly improved profitability and higher sales compared to the third quarter of 2006. Segment sales increased 31 percent from 2006, while segment EBIT increased 79 percent over last year. Gross margins for the segment were affected by the costs associated with the introduction of new emissions-compliant products, but emphasis on cost reduction across the segment resulted in stronger EBIT performance.

The company expects to spend $2.5 billion on capital expenditures in the next five years to meet the demand for current and future products, and with its partners, invest another $1 billion into growing joint venture operations around the world.