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Cummins raises 2021 targets as China’s construction creates robust demand

May 4, 2021 |

(Reuters) -U.S. truck engine maker Cummins raised its full-year forecasts on strong demand from China that is witnessing a surge in construction activity since the pandemic ebbed in the country, and reported its quarterly results ahead of estimates.

Cummins, which focuses on heavy-duty trucks, is also expected to benefit from U.S. President Joe Biden’s massive $2 trillion infrastructure plan that includes building and repairing roads, bridges, mass transit, schools and other infrastructure.

“The strength and breadth of the rebound in demand has surpassed our original expectations,” Chief Executive Officer Tom Linebarger said in a statement on Tuesday.

Cummins, however, said its profit growth in the first quarter ended April 4 was hurt by a global semiconductor chip shortage and bottlenecks in global logistics that led to higher freight costs.

Margins in Cummins’ main engine business fell to 14.4% in the quarter from 16.9% a year earlier.

Shares of the company, which counts PACCAR Inc, Navistar International Corp and Deere & Co among its customers, were down 1.7% in early trading.

Cummins said it now expects 2021 revenue to be up between 20% and 24%, compared with its previous forecast of 8% to 12%.

Earnings before interest, taxes, depreciation and amortization (EBITDA) as a percentage of sales is expected to be in the range of 15.5% and 16% in 2021, from the prior estimate of 15% and 15.5%.

Sales in Cummins’ main engine business rose 14% to $2.46 billion in the first quarter, while volumes increased 26% to 172,300 units.

On an adjusted basis, Cummins earned $4.04 per share, beating analysts’ average estimate of $3.47, according to Refinitiv data.

Net sales rose 21.5% to $6.09 billion, above Wall Street’s estimate of $5.36 billion.

(Reporting by Shreyasee Raj in Bengaluru; Editing by Shinjini Ganguli)

 

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