Cummins (CMI) reported earnings on April 29th for Q1 of fiscal year 2014. Revenue's totaled $4.4 billion, a 12% increase year-over-year from 2013, beating consensus by $230 million. Earnings were reported as $1.87, beating consensus that had expected $1.67. The company closed at $150.81 on Tuesday after reporting earnings, up 3.86%.
A strong quarter was driven by multiple segments on the company. The engine business increased year-over-year by 11%, with the components division delivering record quarterly revenues and earnings as sales were boosted 21%. Revenue in the distribution increased 22% in the first quarter, but had negative earnings due to increased expenses attributed to acquisitions. The Power Generation segment took a loss of 14%, being attributed to negative currency movements, particularly how the US dollar is being depreciated.
North America, which holds nearly 47% of the revenue stream for CMI, had revenues grow by 25% in the first quarter, being attributed to the heavy-duty truck market exceeding predicated sales. Due to new EPA emissions regulations, the medium-duty truck market was up 74% over a weak quarter from 2013. Power Generation was weak in North America for Q1 2014, stemming from an unusually strong demand during Q1 2013.
The engine segment's growth was driven by the North American demand for on-highway trucks, but was slightly offset as the industry is transitioning to Tier 4 Final standards. Revenue is expected to be up 6-8%, up from the original guidance of 4-6%. The components segment is expecting growth going forward from the stronger demand in North America, with margins now expected to be flat for the year instead a loss being expected from China. The Power Generation segment is expected more loses throughout the year, with foreign currency movements being seen as unfavorable for the segment. The distribution segment had most of its gains come from the acquisitions that were made just this past year. The segment is expected to strong for the year, with growth between 22-30%, with an additional $400 million to still be added to revenue in 2014 from the North American acquisitions.
Revenues are expected to continue to be flat year-over-year, between 6-10% for the full year, with EBIT being slightly lowered due to the strengthening of the UK pound versus the US dollar. The revenue percentage is stemming from a perceived stronger demand in North America and, to a much smaller degree, internationally. Driving the company going forward will be their continued excellence in the engine and components business, and the benefits associated with their distributor acquisitions in North America. As we are approaching our price target, we need to reevaluate the company going forward to see if there is still growth to be found or if should sell out of it, but the company should remain a HOLD until that decision is made.