Cummins stocks are down -5.60% today on the news that the firm has been hit by costs of nearly $200 million as it sets out to improve emissions from its engines in response to regulatory concerns.
The US engine maker is currently conducting wide-ranging repairs on all its engines made between 2010 and 2015 so that they produce fewer diesel emissions. Regulatory bodies raised concerns after some of Cummins’ engines produced before 2013 apparently failed to meet emissions tests in 2017. Today’s high emissions standards come at a time when the global auto industry is undergoing a switch to electric vehicles.
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It is not surprising that investors may be a little put-off by the news. Especially since Cummins has also said it faces further charges of up to $400 million if the US Environmental Protection Agency and the California Air Resources Board do not deem the engine repairs to be acceptable.
Richard Freeland, president of Cummins, said that the company is looking to replace a particular engine component only used in North America. In a call with analysts, he said: “We’re driven to resolve this kind of thing over the next two quarters. So, we’ll work with agencies and we’ll get a final answer to this and get this kind of thing behind us.”
The news overshadows an otherwise positive first quarter 2018 earnings report released today which surpassed Wall Street expectations. The company posted a 21.4% increase in quarterly revenue. According to reports, the drive in revenue comes from increasing demand for Cummins engines from US and Canadian industrial trucks. Although the company’s net income from shareholders fell from $396 million to $325 million in the past 52-week period, revenue rose $980 million overall.
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Cummins is a large-cap Fortune 500 company headquartered in the US state of Indiana. It specializes in producing heavy-duty diesel and natural-gas engines as well as power generators for use in a variety of industries including defense and mining. It has over 58,000 employees worldwide, as well as 7,500 dealer locations across over 190 countries and territories. Per-share prices currently sit at $152.4 USD, bringing the firm’s market cap to $25 billion. This is down from a price peak of $192.50 in January this year.
Featured image: Cummins.com
