At a meeting at the New York Stock Exchange, Cummins Inc. (CMI) has revealed that it expects to top its 2008 sales record of $14 billion during 2012. For 2014, the Indiana-based manufacturer and distributor of diesel and natural gas engines, electric power generation systems and engine-related components, fuel systems, controls and air handling systems has set a target of $20 billion in sales and Earnings before Interest and Taxes (EBIT) of 12.5% of sales.
Cummins’ optimism is based on several favorable trends in the long term. First, the emerging regulation of fuel economy and tightening of emission standards will help the company to boost its Engine and Components sales. Cummins’ Engine segment manufactures products for trucks, buses and recreational vehicles as well as for various industrial applications including construction, mining, agriculture, marine, oil and gas, rail and military. The company’s Components segment manufactures filtration and exhausts systems for industrial and passenger car applications.
Secondly, the hike in energy prices will raise demand for Cummins’ fuel-efficient diesel engines. Further, it expects to provide earnings growth in the company’s Power Generation segment, which sells engines, generator sets and alternators and rents power equipment for both standby and prime power users.
Thirdly, Cummins’ business is expected to be driven favorably by continued strength in the emerging markets, including Brazil, China and India. Lastly, government stimulus programs, focused on infrastructure investment, are expected to bolster demand for the products offered by the company’s Engine and Power Generation segments.
In the fourth quarter, Cummins has posted a profit of $270 million or $1.36 per share compared to $43 million or 22 cents a year ago. This was the most profitable fourth quarter in the company’s history.
Cummins also beat the Zacks Consensus Estimate of 74 cents during the quarter. Sales grew 3% to $3.4 billion. EBIT was 11.3% of sales compared with 1.7% of sales in the fourth quarter of 2008.
The strong results were driven by favorable impact from Cummins’ business in Brazil, China and India, along with a significant increase in demand for on-highway truck engines and components in North America in anticipation of new emission standards that took effect at the beginning of 2010.
Cummins has projected sales of $11 billion for 2010, with an EBIT of 7% of sales. The company anticipates a capital spending of $400 million in 2010, an increase of nearly 30% from 2009, to fund projects critical to its long-term growth.
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