(CMI) Cummins Raises Sales Targets

Cummins Inc. (CMI) upgraded its long term outlook for revenues and earnings based on tightening diesel engine emission standards, rising price of energy, globalization and growing investments in infrastructure.

The company expects to achieve $30 billion in sales, with earnings before interest and taxes (EBIT) of 18% of sales in 2015. This translated into an annual growth rate of 14% during the period.

The company foresees four of its operating segments to generate strong revenue growth. It believes 2011 to be another record year despite uncertainty in the market as construction markets in North America continue to recover and truck market recovery is under way.

Cummins believes tightening diesel engine emission standards and regulations will help it to leverage its position as the technology leader in both emissions reduction and fuel economy improvements. Secondly, rising price of energy is likely to boost the demand for fuel-efficient engines, thereby benefiting the company’s power generation business.

Thirdly, intensive globalization will continue to benefit the company, as original equipment manufacturers (OEMs) in developing economies will come forward to use the company’s technology and distribution network. Lastly, growing investments in infrastructure will boost demand for the company’s engines and power generation technology.

Columbus, Indiana-based Cummins is a leading worldwide designer, manufacturer and distributor of diesel and natural gas engines, electric power generation systems, and engine-related components, fuel systems, controls and air handling systems.

The company’s customer base comprises leading manufacturers, including Chrysler LLC, Daimler AG (DDAIF), Volvo AB, PACCAR Inc. (PCAR), Navistar International Corporation (NAV), CNH Global N.V., Komatsu, Scania AB, Ford Motor Company (F) and Volkswagen (VLKAY).

The Zacks #2 Rank (Buy) company posted a profit of $505 million or $2.60 per share in the second quarter of 2011, which was significantly higher than the year-ago profit of $246 million or $1.25 per share.

However, excluding the after-tax gain of $37 million or 19 cents per share during the quarter, the company’s adjusted income stood at $468 million or $2.41 per share, well ahead of the Zacks Consensus Estimate of $2.01 per share.

Besides, Cummins reported EBIT of $707 million (15.2% of sales), up from $401 million (12.5% of sales) in the second quarter of 2010. Reported EBIT in the second quarter excluded a gain of $68 million related to the sale of the exhaust business from the Components segment.

Revenues in the reported quarter amounted to $4.64 billion, up 45% from $3.21 billion in the year-ago quarter, mainly driven by strong performance across all the major markets. Revenues also surpassed the Zacks Consensus Estimate of $4.25 billion.

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