CMI reported earnings, beating consensus by 16.9% on earnings by reporting $2.32 per share and had sales improve by 7% to $4.6 billion. However, CMI reported poor outlook for 2014 in sales, falling short of expectations set by analysts.
Weakness in the global mining market's did not hurt the sales of Cummins earth-moving mining equipment, as Cummins stated that their engines that are used in power construction had a strong quarter. Cummins reported higher demand for on-highway truck components in North America, Europe, and China. While Cummins revenues improved versus the industry, fourth quarter shipments were still considered to be weak with a rebound not likely as they head into their peak selling season. Power generation customers were down 33%, as stronger demand for engines and components ahead of new emission standards being put into place on January 1st. There was an overall weak global demand for Power Generation products. In distribution, Cummins had acquisitions totaling $60 million, increasing their market share in North America and increasing North American revenues by 11%.
Looking forward to 2014, Cummins expects revenue growth for the engine segment to be between 4-6%, as on-highway revenues in North America should be a major driver for growth. The Component segment is expected to have another record year, with revenue being up between 8% to 12%, primarily due to penetration of some of their products in the North American medium duty truck market. The Power Generation segment is expected to be somewhat volatile, with revenue being estimated between -3% to 3%. Lower military revenue could contribute to slow to moderate growth in the segment. The Distribution segment is expected to have a great year, with revenue growth expected to be between 22% to 30% over 2013 levels. Acquisitions in North American have made this possible, with an extra $400 million in revenue expected to be added in 2014. Total company revenue is expected increase between 4%-8%, with the majority of the growth being attributed to the distributor acquisitions, with market share growth and demand growth also being contributing factors in the other segments. Our investment thesis still holds true for Cummins, as emission standards should continue to be a driving force for revenue, along with distribution purchases and the development of natural gas. Our full position should be held.