Cummins Inc. reported results for the fourth quarter and full year of 2014.
Fourth quarter revenue was $5.1 billion, an increase of 11 percent from the same quarter in 2013. The year-over-year increase was driven by higher revenues in North America, which more than offset lower demand in Brazil and Europe.
Earnings before interest and taxes (EBIT) were $629 million for the fourth quarter or 12.4 percent of sales. These results include $32 million of expense associated with cost reduction activities in the Power Generation business. Excluding this expense, EBIT was $661 million or 13.0 percent of sales. This compares to $566 million or 12.3 percent of sales a year ago.
Net income attributable to Cummins in the fourth quarter was $444 million ($2.44 per diluted share), or $465 million ($2.56 per diluted share) excluding one-time items, compared to $432 million ($2.32 per diluted share) in the fourth quarter of 2013.
Revenues for the full year were $19.2 billion, 11 percent higher than 2013. Acquisitions contributed 3 percent to revenue growth. Revenues in North America increased 20 percent and international sales grew 2 percent. Within international markets, growth in China more than offset weaker demand in Brazil and India.
EBIT for the year was $2.5 billion or 13.0 percent of sales. Excluding one-time items, EBIT was $2.53 billion or 13.2 percent compared to $2.16 billion or 12.5 percent of sales in 2013.
Net income attributable to Cummins for the full year was $1.65 billion ($9.02 per diluted share), or $1.67 billion ($9.13 per diluted share) excluding one-time items, up from $1.48 billion ($7.91 per diluted share) in 2013. The full year tax rate was 28.7 percent.
"We reported record revenues in 2014 despite weak economic conditions in several of our most important international markets," said Chairman and CEO Tom Linebarger. "Revenues grew 11 percent as demand in on-highway markets in North America improved, we continued executing our distributor acquisition strategy, and we delivered strong growth in China driven by new products. We continued to invest in future growth, reflecting our commitment to technology and product leadership, while growing EBIT faster than sales."
Cummins' improvement in profitability was driven by record performance in the Components and Distribution businesses and higher earnings in the Engine business. Results in the company's Power Generation business fell short of expectations, but the actions the company has taken to lower costs will improve earnings going forward. Demand in North American on-highway markets is expected to improve again in 2015, but will be partially offset by continued weakness in international markets and the negative impact of the strong U.S. dollar.
"We are committed to improving the quality of our products and service for our customers, closely managing costs and further improving our financial performance in 2015," Linebarger said. "The company delivered on its commitment to return 50 percent of cash from operations to shareholders in 2014 and will do so again this year."
Based on the current forecast, Cummins expects full year revenues to grow between 2 and 4 percent, and EBIT to be in the range of 13.5 to 14.0 percent.