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Lower Truck Production Stems Cummins Q2 Earnings

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Lower truck production in North America and weak global demand for off-highway and power generation equipment led to a 14.4-percent drop in Cummins earnings in the second quarter, compared to 2015.

The multi-industry engine manufacturer reported quarterly earnings of $591 million this week, compared to $721 million in the same quarter last year.

Second quarter revenues of $4.5 billion decreased 10 percent year-over-year. 

Revenues in North America decreased 13 percent while international sales declined by 4 percent. Within international markets, revenues in the Middle East, Mexico and Brazil declined the most.

Earnings before interest and taxes in the quarter were $591 million, or 13.1 percent of sales, down from $721 million or 14.4 percent of sales a year ago.

Net income attributable to Cummins was $406 million, compared to $471 million in the second quarter of 2015.

Based on the current forecast, Cummins expects full year 2016 revenues to be down 8 to 10 percent, lower than our previous guidance of down 5 to 9 percent primarily due to a lower outlook for North America truck production and weaker demand in global off-highway markets. EBIT is expected to be in the range of 11.6 to 12.2 percent of sales, unchanged from three months ago.

Cummins’ Second Quarter by Segment

Engine Segment

•          Sales: $2 billion, down 14 percent

•          Segment EBIT – $206 million, or 10.3 percent of sales, compared to $278 million or 12 percent of sales

•          Segment EBIT reflects a $39 million charge to increase our estimate for the loss contingency recorded in the fourth quarter of 2015

•          On-highway revenues declined 15 percent primarily due to weaker truck production in North America

Distribution Segment

•          Sales: $1.5 billion, up 3 percent

•          Segment EBIT – $87 million, or 5.6 percent of sales, compared to $113 million or 7.6 percent of sales

•          Increased revenue from acquisitions was partially offset by a decline in organic sales in North America and the Middle Eastand the negative impact from a stronger US dollar

Components Segment

•          Sales – $1.3 billion, down 8 percent

•          Segment EBIT – $190 million, or 14.9 percent of sales, compared to $223 million or 16.0 percent of sales

•          Revenues declined in North America due to lower industry truck production, partially offset by growth in China

Power Systems Segment

•          Sales: $921 million, down 16 percent

•          Segment EBIT – $90 million, or 9.8 percent of sales, compared to $127 million, or 11.6 percent of sales

•          Revenues declined in most major markets due to weak demand for power generation equipment and industrial engines

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