Cummins (NYSE: CMI) reported Q4 EPS of $2.56, $0.14 better than the analyst estimate of $2.42. Revenue for the quarter came in at $5.6 billion versus the consensus estimate of $5.3 billion.

• Fourth quarter revenues of $5.6 billion; GAAP1 Net Income of $300 million
• Fourth quarter results include a $119 million pre-tax restructuring charge
• Excluding restructuring, EBITDA in the fourth quarter was 12.2 percent of sales and Diluted EPS $2.56
• Full year revenues of $23.6 billion; GAAP1 Net Income of $2.3 billion
• Excluding restructuring, EBITDA for the full year was 15.8 percent of sales; Diluted EPS of $15.05
• Returned a record $2.0 billion in cash to shareholders through dividends and share repurchases in 2019
• The company expects full year 2020 revenues to be down 8 to 12 percent, EBITDA expected to be in the range of 14.2 to 15.2 percent

“After a strong start to 2019, demand declined across most geographies and end markets in the second half of the year,” said Tony Satterthwaite, President and Chief Operating Officer. “We moved quickly to align costs with the weaker global outlook, executing a number of actions which we expect to yield annual savings of $250 to $300 million.”

“Despite challenging conditions in many of our largest markets over the last six months, Cummins delivered record profits and operating cash flow in 2019,” said Chairman and CEO Tom Linebarger. “The actions we have taken to reduce costs will mitigate a further slowdown in 2020 and position the Company for stronger performance when market demand improves. We will continue investment in new technologies and products in 2020 to generate strong growth and profitability for the company in both the near and long term, which is consistent with how we have managed through prior cycles.”

2020 Outlook:

Based on the current forecast, Cummins projects full year 2020 revenues to be down 8 to 12 percent, and EBITDA to be in the range of 14.2 to 15.2 percent of sales. Revenue declines in 2020 are driven by lower truck production in North America, Europe, China, and India as well as lower projected demand in off-highway markets, including global Power Generation, mining, oil and gas, and construction markets. The midpoint of guidance represents a 25 percent decremental EBITDA margin excluding the impact of the New Power segment.

The company plans to return 75 percent of Operating Cash Flow to shareholders in the form of dividends and share repurchases.

Our outlook does not include any potential impact of the company’s review of its emission certification process and compliance with emission standards or additional expenses associated with executing future cost reduction initiatives.

2019 Highlights:

• The Company returned a record $2.0 billion to shareholders in the form of dividends and share repurchases. We repurchased 8.1 million shares, representing 5.2 percent of shares outstanding.
• Cummins closed on its previously announced acquisition of fuel cell and hydrogen production technologies provider Hydrogenics Corporation.
• Announced Cummins new environmental sustainability strategy called PLANET 2050 which includes science based goals that meet or exceed the goals in the United Nations Paris agreement on climate change.
• Cummins was ranked No. 17 in Newsweek magazine’s first rating of America’s Most Responsible Companies, the highest ranked company in the automotive and component category.
• Launched the Company’s new 2020 X15 Efficiency Series engine which meets 2021 greenhouse gas standards one year early in North America, delivering up to 5 percent better fuel economy than the prior X15 Efficiency Series. The X15 Efficiency Series is paired with a 12-speed Cummins Eaton Joint Venture Automated Manual Transmission and delivers both improved fuel economy and reliability for customers, while lowering greenhouse gas emissions.
• The first Cummins-powered battery electric bus entered service in Santa Monica, California.

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