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
