RERMAG

Cummins Reports Record 3Q Sales of $3.37 Billion

Cummins Inc. last week reported record revenues and higher earnings for the third quarter, led by quarterly best sales in three of its four business segments. Given the company’s performance through the first nine months of 2007 and the outlook for the fourth quarter, Cummins remains on pace to meet its earnings guidance of $7.15 to $7.65 a share, which would make 2007 the most profitable year in company history.

Sales grew 20 percent to $3.37 billion, from $2.81 billion during the same period in 2006, eclipsing the company’s previous high mark set in the second quarter of 2007. Net income for the third quarter increased 7.6 percent to $184 million, or $1.84 per diluted share, from $171 million, or $1.69 per diluted share in the third quarter last year.

Earnings Before Interest and Taxes rose 3.4 percent to $306 million, or 9.1 percent of sales, from $296 million, or 10.5 percent of sales, in the same period in 2006. Earnings growth was moderated by a downturn at some OEM customers, and the expected higher costs associated with the introduction of new emissions-related products.

Despite the solid profit numbers, Cummins stock — which has increased nearly 90 percent in value this year — dropped $22.17, or 17 percent, to $111.56 on Oct. 25 because quarterly earnings rose less than analysts projected. Third-quarter profit was hurt by materials costs for new engines that meet stricter U.S. emissions standards, Cummins officials said. At the close of trading, Cummins shares were trading at $116.94.

“We continue to experience significant growth in most of our markets around the world, and are well-positioned to take advantage of many opportunities for future growth,” said Tim Solso, Cummins chairman and CEO.

In the company’s Engine business, gains in many markets, including construction and mining, propelled the segment to a 17-percent sales increase of a record $2.15 billion compared to the same period last year. Segment EBIT of $155 million, or 7.2 percent of sales, was 15 percent lower than $183 million (9.9 percent of sales) for the same period in 2006. Segment EBIT was negatively affected by higher material costs and warranty costs for new emissions-compliant engines.

The company’s Power Generation business reported record sales of $776 million in the quarter, a 24-percent increase from the third quarter of 2006. Segment EBIT jumped 46 percent over the same period last year on strong volumes and improved pricing.

The company said it also expects to spend $2.5 billion on capital expenditures in the next five years to meet the demand for current and future products, and with its partners, invest another $1 billion into growing joint venture operations around the world.

Headquartered in Columbus, Ind., Cummins Inc., is a corporation of complementary business units that design, manufacture, distribute and service engines and related technologies, including fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems.

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