Cummins Posts ‘Strong Q2 Performance’

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Cummins Inc. today (July 27) reported for the second quarter its highest quarterly earnings as a percentage of sales in more than 25 years. Continued productivity improvements in the company’s manufacturing operations, as well as strong performance in international markets, drove significant year-over-year gains across all the company’s business segments, according to a news release.

“Our strong performance during the downturn has allowed us to make the investments necessary to position the company for a period of long-term profitable growth as our markets continue to improve,” the company stated.

Earnings Before Interest and Taxes (EBIT) was $401 million, or 12.5% of sales, up from $109 million or 4.5% of sales in the second quarter of 2009. EBIT also improved from 10.7% in the first quarter of 2010. For the first time ever, all four segments posted quarterly EBIT in excess of 10% of sales.

Sales of $3.21 billion in the second quarter were 32% higher than $2.43 billion in the same quarter in 2009. Net income attributable to Cummins Inc. in the second quarter more than quadrupled to $246 million, or $1.25 a share, compared to $56 million, or 28 cents a share, in the same period a year ago.

The sales gains were led by the company’s Engine and Components segments, which each reported 45% sales improvements compared to the same period in 2009. Power Generation sales increased 16%, while Distribution sales rose 24%. The company delivered these strong results, even though the North American heavy duty truck market remains weak as result of the transition to new on-highway emissions standards at the beginning of the year.

Based on the company’s performance in the first half of 2010 and its forecast for the rest of the year, Cummins today increased its financial guidance for 2010. The company now expects to generate EBIT of 12%of sales on revenues of $13 billion.

“We had an outstanding quarter,” said Cummins Chairman and CEO Tim Solso. “The work we have done to strengthen our manufacturing operations during the downturn has resulted in significant productivity gains, and we continue to benefit from our leadership position in large and growing international markets such as China, India and Brazil.”

The company’s non-U.S. markets continued to perform well, with sales up 51% outside the United States in the second quarter compared to a year ago. Sales outside the U.S. accounted for 64% of the company’s revenue in the quarter.

The company continued to return value to shareholders by repurchasing $123 million of its shares during the second quarter. The company has now repurchased $310 million worth of stock under its current $500 million authorization.

Even with the stock repurchase, the company improved its cash position from the first quarter of the year. The company generated $301 million in cash from operations in the second quarter, compared to $245 million in the same period last year and $126 million in the first quarter.

“Our strong performance during the downturn has allowed us to make the investments necessary to position the company for a period of long-term profitable growth as our markets continue to improve,” said Cummins President and COO Tom Linebarger. “We are working hard to prepare for future growth, even as we continue to concentrate on managing the business through this challenging economic period.”