Cummins Inc. (NYSE: CMI) rode a recovery of truck and construction demand in China to significant beats of fourth-quarter sales and earnings estimates by analysts.
Fourth-quarter revenues of $5.8 billion increased 5% from the same quarter in 2019. North America sales were flat. International revenue rose 12%.
Q4 earnings before interest, taxes, depreciation and amortization (EBITDA) were $837 million, or 14.4% of sales. That included $36 million in reorganization and facility closures. In the same period a year ago, EBITDA was $682 million, or 12.2% of sales, not counting $90 million in restructuring costs.
Net income in the quarter was $501 million, or $3.36 per diluted share (EPS), compared to $390 million, or $2.56, excluding restructuring in 2019.
The consensus EPS estimate was $2.76, according to investor site Seeking Alpha. The consensus revenue estimate was $5.18 billion.
Full-year 2020 results
Full-year revenues were $19.8 billion, 16% lower than 2019. Net income was $1.8 billion, or $12.01 per share.
Sales in North America in 2020 declined 21%. International revenues declined 7%. All major regions except China reported lower sales. China, which reported record sales, was the first to emerge from the coronavirus pandemic.
“Current indicators point to improving demand in a number of key regions and markets in 2021,” Chairman and CEO Tom Linebarger said in a press release. “However, significant uncertainty remains, requiring continued strong focus on managing costs and cash flow as our markets continue to recover around the world.
“We are still operating under a pandemic with extreme safety measures in place and our suppliers and customers are doing the same,” Linebarger said.
Like other manufacturers, Cummins hinted at supply chain disruptions in the first quarter. A global shortage of semiconductors is impacting automakers and others that shut off orders amid pandemic-related plant shutdowns in March and April last year. Microchip manufacturers redirected that supply to consumer products.
Cummins forecasts full-year 2021 revenues to be up 8% to 12%. EBITDA is expected to be up 15% to 15.5%.
Segment by segment
Here are results by business unit compared to 2019:
- Sales: $2.3 billion, up 2%.
- Segment EBITDA: $338 million, or 14.5% of sales, compared to $277 million, or 12.1% of sales excluding restructuring.
- North America sales were flat. International sales rose 8%, primarily due to increased demand in China and India.
- Sales: $2 billion, down 2%.
- Segment EBITDA: $165 million, or 8.3% of sales, compared to $164 million or 8% of sales excluding restructuring.
- Revenues in North America were down 7%. International sales increased by 8%.
- Power generation demand rose, offset by declines in parts and service.
- Sales: $1.8 billion, up 18%.
- Segment EBITDA: $280 million, or 15.3% sales, compared to $209 million, or 13.4% of sales excluding restructuring.
- Revenues in North America increased by 1%. International sales rose 40% due to higher demand in China and India.
Power systems segment
- Sales: $989 million, down 6%.
- Segment EBITDA: $74 million, or 7.5% of sales, compared to $55 million, or 5.2% of sales excluding restructuring.
- Power generation revenues fell 2%. Industrial revenues decreased 12% because of lower demand in mining and oil and gas markets.
New power segment
- Sales: $34 million, up 89%.
- Segment EBITDA loss: $51 million.
- Revenues increased due to greater demand in transit and school bus markets and commissioning of 29 megawatts of hydrogen-making electrolyzer projects.
- Costs to develop fuel cells, electrolyzers and battery-electric vehicles contributed to EBITDA losses.