Cummins Earnings: After Four Quarters of Expanding, Margins Shrink as Profit Falls

S&P 500 (NYSE:SPY) component Cummins Inc. (NYSE:CMI) reported its results for the third quarter. Cummins is a company engaged in the design, manufacturing, and distribution of diesel and natural gas engines and related technologies. Its services to markets worldwide include electric power generation systems and engine-related component products.

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Cummins Inc. Earnings Cheat Sheet

Results: Net income for Cummins Inc. fell to $352 million ($1.86 per share) vs. $452 million ($2.35 per share) a year earlier. This is a decline of 22.1% from the year-earlier quarter.

Revenue: Fell 11% to $4.12 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Cummins Inc. beat the mean analyst estimate of $1.84 per share. It fell short of the average revenue estimate of $4.4 billion.

Quoting Management: “Demand has dropped sharply over the last three months, reflecting a high degree of uncertainty among customers in most geographic markets,” said Tom Linebarger, Chairman and Chief Executive Officer. “We have been responding to the conditions by delaying or cancelling projects, flexing production at some of our manufacturing plants, reducing discretionary expenses, and reducing our workforce by 1000 to 1500 people by the end of this year. We are continuing to fund projects that are important for future growth and meeting commitments to customers. We are working to respond to the conditions now to ensure the long term strength of the company and to best serve the many stakeholders who rely on Cummins long term success.”

Key Stats:

The company has now surpassed analyst estimates for four quarters in a row. It beat the mark by 18 cents in the second quarter, by 16 cents in the first quarter, and by 32 cents in the fourth quarter of the last fiscal year.

The company’s net income has fallen in each of the last two quarters. In the second quarter, net income fell 7.1% from the year-earlier quarter.

Revenue has dropped in the past two quarters. In the second quarter, revenue declined 4.1% to $4.45 billion from the year-earlier quarter.

Looking Forward: For the next quarter, analysts are growing pessimistic about the company’s expected results. The average estimate for the fourth quarter is $1.87 per share, dropping from $2.49 a month ago. In the past month, the average estimate for the fiscal year has fallen from $9.62 per share to $8.55.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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