Cummins Inc. posted record first-quarter sales because it charged more for new products than the cost of materials Net income fell in part due to a $158 million write-off for indefinite suspension of operations in Russia.
The engine maker, which is rapidly transforming into multiple forms of alternative power generation, said business in North America improved 12% on the increases. More likely to come.
“If we don’t take additional action on pricing, we’ll be worse off on the same sales as before the whole COVID pandemic started,” said Tom Linebarger, CEO and President of Cummins.
“We continue to review future pricing actions to bridge this difference as inflation continues,” he told analysts on a conference call on Tuesday.
Cummin (New York Stock Exchange: CMI), like most manufacturers, continues to struggle with supply chain disruptions. The company earlier expected some improvement in the second half of the year based on supplier reports.
Cummins ‘lose confidence’ in the ability of suppliers to deliver
“We’re just losing faith that they’re actually going to deliver,” Linebarger said. “Our concerns are growing especially in chips and electronics. With some of the shutdowns in China, we may not see as much positive impact in the second half as we had hoped. »
Foreign revenues decreased by 3%. The decline was limited to China, where Cummins has a strong presence.
“The continued impact of COVID, particularly in China, and the effect of the conflict in Ukraine continue to present challenges to our global operations,” Jennifer Rumsey, president and chief operating officer of Cummins, said in a statement. . Press release.
Business beats on revenue – again
A consensus of analysts polled by investor site Seeking Alpha called for earnings per share of $3.55 and revenue of $6.06 billion.
First-quarter revenue was $6.4 billion. Net income was $418 million, or $2.92 per fully diluted share. It was $603 million, or $4.07, in the first quarter of last year. Earnings before interest, taxes, depreciation and amortization were $755 million, or 11.8% of sales. That compares to a record high of $980 million, or 16.1%, a year ago.
The company raised its full-year revenue forecast to 8% from an earlier estimate of 6%. It maintained its full-year EBITDA targets at 15.5% of sales.
In addition to the Russian hit of $1.09 per share, Cummins suffered a write-off of $17 million, or 9 cents, for the separation of its filtration unit. Last week, the company filed confidentially with the Securities and Exchange Commission an initial public offering to turn filtration into a stand-alone business.
Share buybacks and dividends set at 50% of operating profit
Cummins has seen mostly downward revisions to EPS and revenue estimates in recent months. It plans to return approximately 50% of operating cash flow to shareholders through dividends and share buybacks.
Also in the quarter, Cummins completed its acquisition of Jacobs Vehicle Systems for $325 million. JVS provides engine braking, cylinder deactivation, start-stop, and thermal management technologies essential to meet current and future emissions regulations.
He also announced the $3.7 billion purchase of Meritor Inc., a leader in electric drivetrain, mobility, braking, aftermarket and powertrain solutions for the commercial and industrial vehicle markets. Cummins will be able to provide integrated powertrains for combustion, electric and fuel cell applications.
Editor’s note: Updates previous story with comments from analyst call.
Cummins files confidential recording to make filtration unit public
Cummins to buy Meritor for $3.7 billion
Cummins is reworking its engine families to run on multiple low-carbon fuels
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