Cummins Inc. reported revenues of $5.5 billion for the fourth quarter of last year, an increase of 22 percent compared with the same period in 2016. The company attributes a majority of the growth to strong demand for trucks, construction and mining equipment. Sales in North America and international markets both increased by 22 percent.
Earnings before interest and taxes (EBIT) in the fourth quarter were $620 million, or 11.3 percent of sales, an increase from $526 million or 11.7 percent of sales a year ago. EBIT was negatively impacted by $39 million as a result of charges incurred by unconsolidated joint ventures related to U.S. tax reform, according to the company. Excluding the impact of tax reform, EBIT for the fourth quarter of 2017 was $659 million, or 12 percent of sales.
Net income attributable to Cummins in the fourth quarter was a net loss of $274 million (a loss of $1.65 per diluted share), compared with net income of $378 million ($2.25 per diluted share). Fourth quarter net income included $777 million in one-time charges related to tax reform. Excluding the tax reform impact, net income attributable to Cummins in the fourth quarter was $503 million ($3.03 per diluted share), reflecting a 19.5 percent tax rate.
In the fourth quarter, the company reported engine sales of $2.3 billion, up 16 percent; sales in the distribution segment of $1.9 billion, up 16 percent; component segment sales of $1.6 billion, up 32 percent; and sales in the power systems segment of $1.1 billion, an increase of 18 percent. On-highway revenues increased 14 percent, and off-highway revenues increased 27 percent primarily because of increased global demand in truck and constructions markets, according to Cummins.
Revenues for the full year 2017 were $20.4 billion, 17 percent higher than 2016. Revenues in North America increased 15 percent and international sales increased 19 percent. EBIT for the year was $2.4 billion or 12 percent of sales, or 12.2 percent of sales excluding charges related to tax reform. This compares to $2 billion, or 11.4 percent of sales in 2016.
Net income attributable to Cummins for the full year was $999 million ($5.97 per diluted share), compared to $1.4 billion ($8.23 per diluted share) in 2016. Excluding charges totaling $777 million in connection with tax reform, full-year net income attributable to Cummins was $1.8 billion ($10.62 per diluted share), with a full year tax rate of 24.5 percent.
“The company delivered strong growth, solid profitability and record operating cash flow in 2017,” says Chairman and CEO Tom Linebarger. “We expect demand to remain strong in many of our core markets in 2018, and profitability to improve as a result of higher sales and continued execution of our cost reduction initiatives. The company again plans to return at least 50 percent of operating cash flow to shareholders in 2018.”
Based on the current forecast, Cummins expects full-year 2018 revenues to be up 4 to 8 percent, and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) to be in the range of 15.8 to 16.2 percent of sales. EBITDA for the full year 2017 was 15 percent of sales, excluding the impact of U.S. tax reform.