Cummins reports strong quarterly sales growth

Cummins Inc. saw a strong increase in fourth-quarter sales, but ended up with a quarterly loss because of expenses related to federal tax reform.

On Tuesday, the Columbus-based engine maker posted a quarterly loss of $274 million, or $1.65 per share, as compared with a profit of $378 million, or $2.25 per share, during the same period a year earlier. 

Cummins said it recorded $777 million in one-time charges last quarter related to federal tax reform. That figure includes several different elements, including the revaluation of the company’s deferred tax assets and liabilities at the new lower corporate tax rate; a one-time transitional tax on unrepatriated earnings; and withholding taxes on foreign earnings.

Excluding the effect of federal tax reform, Cummins said it would have posted a quarterly profit of $503 million, or $3.03 per share. 

Those results beat Wall Street earnings expectations of $2.65 per share, according to the average estimate of 11 analysts surveyed by Zacks Investment Research.

Revenue for the quarter totaled $5.5 billion, up 22 percent year-over-year. Cummins said the sales increases were driven by strong demand for trucks, construction and mining equipment, with sales up both in North America and in international markets.

For the full year, Cummins posted a profit of $999 million, or $5.97 per share. Excluding the effect of tax reform, the company’s full-year profit would have been $1.8 billion, or $10.62 per share. In comparison, Cummins reported profit of $1.4 billion, or $8.23 per share, in 2016.

“The company delivered strong growth, solid profitability and record operating cash flow in 2017,” said Chairman and CEO Tom Linebarger in written remarks. “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.

Cummins said it expects its full-year 2018 revenue to increase between 4 percent and 8 percent. It expects its earnings before interest, taxes, depreciation and amortization, or EBITDA, to be in the range of 15.8 percent to 16.2 percent of sales. Excluding the effects of tax reform, full-year EBITDA in 2017 was 15 percent of sales.

Shares of Cummins were trading at $170.97 Tuesday morning, down 4.5 percent from Monday’s close. The stock has risen more than 20 percent in the past year.