Cummins Reports Mixed Q3 Results, Margins Shrink, Cuts FY21 Outlook

Cummins Inc. CMI reported third-quarter sales growth of 16.6% year-over-year to $5.97 billion, beating the consensus of $5.87 billion.
Sales in North America increased 13% Y/Y while international revenues increased 22% Y/Y, driven by solid demand across all global markets outside China.
Sales by segments: Engine $2.6 billion (+22% Y/Y), Distribution $2 billion (+14% Y/Y), Components $1.8 billion (+16% Y/Y), Power Systems $1.2 billion (+19% Y/Y), and New Power $23 million (+28% Y/Y).
EPS improved to $3.69 compared to $3.36 in 3Q20, missing the consensus of $3.91.
The gross margin contracted by 266 bps to 23.7%, operating income was $666 million (-0.6% Y/Y), and the margin contracted by 193 bps to 11.2%.
Cummins generated a year-to-date operating cash flow of $569 million, compared to $1.22 billion a year ago.
EBITDA was $862 million compared to $876 million in 3Q20, and the margin contracted by 267 bps to 14.4%.
The company recently increased its quarterly dividend from $1.35 to $1.45 a share.
FY21 Outlook: Cummins lowered its revenue guidance to be up ~20% versus last year (prior view 20% - 24% growth). The company cut its EBITDA margin outlook to ~15% (previous view 15.5% - 16%), citing ongoing supply chain challenges.
Price Action: CMI shares are trading lower by 1.51% at $241.6 on the last check Tuesday.

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