Cummins Inc. (CMI) is a global power solutions leader, providing a wide range of advanced diesel, natural gas, electric, and hybrid powertrains, as well as related components and technologies. The company's diverse product portfolio and extensive service network have positioned it as a trusted partner for original equipment manufacturers (OEMs), distributors, dealers, and end-customers worldwide.

Financials

In the fiscal year 2023, Cummins reported annual net income of $735 million and annual revenue of $34.065 billion, showcasing its ability to navigate challenging market conditions. The company's annual operating cash flow stood at $3.966 billion, while its annual free cash flow reached $2.753 billion, demonstrating its strong liquidity and financial flexibility.

During the first quarter of 2024, Cummins delivered solid financial results, with revenue of $8.4 billion, a slight decrease of 1% compared to the same period in 2023. Net income attributable to Cummins Inc. for the quarter was $1.993 billion, or $14.03 per diluted share, which included a $1.3 billion gain related to the divestiture of the company's Atmus Filtration Technologies business.

Excluding the one-time gain and other adjustments, Cummins' EBITDA for the first quarter of 2024 was $1.3 billion, or 15.5% of sales, compared to $1.4 billion, or 16.3% of sales, in the prior-year period. The decrease in EBITDA percentage was primarily driven by investments in new products and capabilities, as well as lower sales volumes.

Segment Performance

Cummins' performance during the quarter was supported by strong demand in several key markets, including power generation and medium-duty trucks in North America, as well as continued growth in India. However, the company faced headwinds in certain regions, such as weaker demand in China and Europe, particularly in the construction and emission solutions markets.

The Components segment, which includes products such as axles, drivelines, and aftertreatment systems, reported revenue of $3.3 billion, a 6% decrease compared to the first quarter of 2023. Segment EBITDA, excluding costs related to the Atmus divestiture, increased from 14.6% to 14.8% of sales, driven by improved performance within the business.

The Engine segment, which produces engines for on-highway and off-highway applications, reported revenue of $2.9 billion, a 2% decrease from the prior-year period. Segment EBITDA was 14.1%, down from 15.3% a year ago, as the benefit of pricing was offset by lower volumes and higher research costs.

The Distribution segment, which includes the company's wholly-owned and partially-owned distributorships, reported a 5% increase in revenue to $2.5 billion. Segment EBITDA decreased to 11.6% of sales, compared to 13.9% in the first quarter of 2023, due to a decline in aftermarket sales, particularly to industrial customers.

The Power Systems segment, which designs, manufactures, and sells engines for industrial applications and power generation, reported a 3% increase in revenue to $1.4 billion. Segment EBITDA improved from 16.3% to 17.1% of sales, driven by higher volumes, improved pricing, and operational improvements.

Cummins' Accelera segment, which focuses on hydrogen production technologies and electrified power systems, reported a 9% increase in revenue to $93 million. The segment's EBITDA loss was $101 million, compared to a loss of $94 million in the prior-year period, as the company continues to invest in the development of these emerging technologies.

Outlook

Looking ahead, Cummins has updated its full-year 2024 guidance. The company now expects consolidated revenue to be down 2% to 5%, an improvement from its previous guidance, which had included the Atmus business for the full year. The company's EBITDA margin is now projected to be in the range of 14.5% to 15.5%, up 10 basis points from the prior guidance.

The company's revised outlook reflects stronger demand in its base business, particularly in the North American heavy-duty truck and global power generation markets, which more than offset the impact of the Atmus divestiture. Cummins also expects to benefit from continued pricing actions and cost optimization efforts to mitigate the impact of inflationary pressures.

Liquidity

Cummins' liquidity position remains strong, with $3.1 billion in cash and marketable securities and access to $4.0 billion in credit facilities as of March 31, 2024. The company's debt-to-capital ratio stood at 40.4%, providing ample financial flexibility to fund its growth initiatives, including investments in new product development and capacity expansion.

Recent Developments

The company's strategic focus on innovation and sustainability is evident in its recent product launches and initiatives. In March 2024, Cummins successfully completed the separation of its Atmus Filtration Technologies business, allowing the company to sharpen its focus on advancing its core power solutions offerings. Additionally, the company introduced its new fuel-agnostic Cummins HELM platform, which provides customers with greater flexibility in navigating the energy transition.

Conclusion

Cummins' strong financial performance, diversified product portfolio, and commitment to innovation position the company well to capitalize on the evolving global demand for power solutions. As the company continues to invest in new technologies and expand its global reach, investors can expect Cummins to remain a key player in the power solutions industry.