Business Overview: A Century of Power Solutions Cummins Inc. was founded in 1919 as Cummins Engine Company in Columbus, Indiana, as one of the first diesel engine manufacturers. The company changed its name to Cummins Inc. in 2001. In its early years, Cummins focused on developing and producing diesel engines, growing steadily and establishing a reputation for quality and reliability.
Over time, Cummins expanded its product portfolio beyond diesel engines, adding components like turbochargers, fuel systems, and automated transmissions. The company also grew its distribution network, building an extensive global service and support system. This expansion led to the creation of its current five key business segments: Engine, Components, Distribution, Power Systems, and Accelera.
A significant milestone in Cummins' history was the establishment of joint ventures and alliances with customers and partners worldwide. These partnerships allowed the company to increase its market presence in various geographic regions, reduce capital spending, streamline supply chain management, and develop new technologies. Major joint ventures include Dongfeng Cummins Engine Company in China, Tata Cummins in India, and the Eaton Cummins Automated Transmission Technologies joint venture.
Throughout its history, Cummins has faced challenges, particularly in navigating increasingly stringent emissions regulations globally. This required significant investment in new product development to maintain compliance. In 2023, Cummins announced an agreement to resolve certain regulatory civil claims regarding its emissions certification and compliance process for certain engines, resulting in a substantial one-time charge. The company worked diligently to address this issue and maintain its reputation for quality and environmental stewardship.
Financial Performance In the fiscal year 2024, Cummins reported record revenues of $34.1 billion, essentially flat compared to the previous year, despite challenges in the North American heavy-duty truck market and the divestiture of the Atmus Filtration business. The company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) reached a record $6.3 billion, or 18.6% of sales, up from $3.0 billion, or 8.9% of sales, in 2023.
Excluding non-routine items, such as the $1.3 billion gain from the Atmus divestiture and charges related to the Accelera strategic reorganization, Cummins' adjusted EBITDA for 2024 was $5.4 billion, or 15.7% of sales, compared to $5.2 billion, or 15.3% of sales, in the prior year. This improvement was primarily driven by higher power generation volumes, favorable pricing, and improved operational efficiency, which more than offset the impact of lower North American heavy-duty truck volumes and the reduction in margin from the Atmus separation.
Cummins' net income attributable to the company in 2024 was a record $3.95 billion, or $28.37 per diluted share, compared to $735 million, or $5.15 per diluted share, in 2023. The significant increase was largely due to the $1.3 billion non-taxable gain from the Atmus divestiture, as well as the absence of the $2.0 billion charge related to the Settlement Agreements recorded in the prior year.
In the most recent quarter (Q4 2024), Cummins reported revenue of $8.4 billion, a 1% decrease year-over-year. This decrease was primarily due to lower North America heavy-duty and pickup truck volumes, as well as the reduction in sales from the separation of the Atmus business. However, these factors were partially offset by continued high demand in global power generation markets, stronger aftermarket, and North America medium-duty truck volumes, as well as improved pricing. Net income for the quarter was $418 million, with operating cash flow of $1.4 billion.
For the full year 2024, Cummins generated operating cash flow of $1.49 billion and free cash flow of $279 million. The company's financial position remains strong, with a debt-to-equity ratio of 0.74 as of December 31, 2024. Cash and marketable securities stood at $2.26 billion, while available credit capacity totaled $4 billion from the company's credit facilities. The current ratio was 1.31, and the quick ratio was 0.80, indicating solid short-term liquidity.
Operational Highlights During 2024, Cummins made several strategic moves to strengthen its position in the evolving power solutions market. The company introduced the Cummins HELM platform, which provides customers with the flexibility to choose the fuel type, including advanced diesel, natural gas, and hydrogen, that best suits their operational needs while meeting emissions requirements. This platform was applied across Cummins' legendary B, X10, and X15 series engine portfolios, further demonstrating the company's commitment to delivering innovative and versatile solutions.
In the Power Systems segment, Cummins continued to see strong demand, particularly in the data center market, which drove a 13% increase in revenues and a 370-basis point expansion in EBITDA margins to 18.4% in 2024. To support this growth, the company announced a $200 million investment to expand its power generation manufacturing capacity across the U.S., UK, and India.
Cummins also made progress in its Accelera business, forming a strategic joint venture, Amplify Cell Technologies, with Daimler Trucks, PACCAR, and EVE Energy to accelerate the localization of battery cell production and the battery supply chain in the United States. This collaboration will support the development of zero-emission solutions for electric commercial vehicles and industrial applications.
Despite the challenges faced in the North American heavy-duty truck market, Cummins' diversified business model and global presence continued to demonstrate resilience, with strong performance in its Power Systems, Distribution, and Engine segments offsetting the decline in heavy-duty truck demand.
Segment Performance The Engine segment, which accounted for 28% of consolidated net sales and 33% of consolidated EBITDA in 2024, saw flat sales compared to 2023. Increased global power generation demand, especially in data center markets, and higher demand in North American medium-duty truck and bus markets were offset by the divestiture of Atmus, lower emission solutions demand mainly in China, lower demand in North American heavy-duty truck and pick-up truck markets, and weaker demand in global construction markets.
The Components segment, representing 28% of consolidated net sales and 32% of consolidated EBITDA, experienced a 13% decrease in sales in 2024. This decline was primarily due to the divestiture of Atmus and lower demand for emission solutions, mainly in China.
The Distribution segment, accounting for 27% of consolidated net sales and 27% of consolidated EBITDA, saw an 11% increase in sales in 2024. This growth was primarily driven by higher demand in power generation markets, especially in North America and Europe.
The Power Systems segment, contributing 16% of consolidated net sales and 23% of consolidated EBITDA, reported a 13% increase in sales in 2024. This growth was primarily due to improved global power generation sales, especially in data center markets.
The Accelera segment, which accounted for 1% of consolidated net sales and 17% of consolidated EBITDA in 2024, underwent a strategic review in the fourth quarter to streamline operations and refocus investments. This review resulted in non-cash charges totaling $312 million related to inventory write-downs, intangible and fixed asset impairments, and joint venture impairments.
Outlook and Guidance For the fiscal year 2025, Cummins is forecasting total company revenues to be down 2% to up 3% compared to 2024, with EBITDA expected to be in the range of 16.2% to 17.2% of sales, up from 15.7% in the prior year.
While the company anticipates weaker first-half demand in the North American on-highway truck markets, it expects many of its other end markets, particularly power generation, to remain strong throughout the year. Industry production for heavy-duty trucks in North America is projected to be 260,000 to 290,000 units in 2025, flat to down 10% year-over-year, with uncertainty around the timing and extent of any potential prebuy activity.
In the medium-duty truck market, Cummins expects the market size to be 140,000 to 155,000 units, down 5% to 15% compared to 2024, primarily driven by weaker-than-expected recent net orders and a depleting backlog. The company's engine shipments for pickup trucks in North America are expected to be 130,000 to 140,000 units in 2025, flat to up 5% year-over-year.
Cummins remains optimistic about the growth potential in its global power generation markets, projecting a 5% to 15% increase in revenues in 2025, driven by continued high demand in the data center market. The company also expects its Accelera segment to generate revenues between $400 million and $450 million in 2025, as it continues to make targeted investments aligned with market demand while reducing costs.
In China, Cummins projects total revenue, including joint ventures, to increase 5% in 2025. Global construction markets are expected to be flat to down 10% year-over-year in 2025, primarily driven by weak property investment and shrinking export demand in China. For the aftermarket business, Cummins expects revenue improvement with a range of flat to an increase of 5% for 2025.
Risks and Challenges Cummins operates in a highly competitive and globally diverse environment, which exposes the company to various risks and challenges. These include fluctuations in commodity prices, supply chain disruptions, labor shortages, and currency exchange rate volatility, all of which can impact the company's cost structure and profitability.
The transition to alternative powertrain technologies, such as electric and hydrogen-powered vehicles, also presents both opportunities and risks for Cummins. While the company's Accelera segment is well-positioned to capitalize on these emerging trends, the pace and extent of adoption remain uncertain, which could affect the company's long-term growth and market share.
Regulatory changes, particularly related to emissions standards and environmental regulations, can also significantly impact Cummins' product development and manufacturing strategies. The company's ability to anticipate and adapt to these evolving requirements will be crucial in maintaining its competitive edge.
Furthermore, Cummins' global footprint exposes it to geopolitical risks, such as trade tensions, tariffs, and economic uncertainties in various regions, which could disrupt its supply chain and distribution network, ultimately affecting the company's financial performance.
Liquidity Cummins maintains a strong liquidity position, which allows the company to invest in growth opportunities, return capital to shareholders, and navigate potential economic uncertainties. As of the end of fiscal year 2024, the company reported a solid cash and cash equivalents balance of $2.26 billion, supported by its consistent cash flow generation from operations.
The company's financial flexibility is further enhanced by its access to credit facilities totaling $4 billion, comprising a $2 billion 364-day credit facility and a $2 billion 5-year credit facility. Cummins' investment-grade credit rating enables favorable terms for debt financing when needed. The company's disciplined approach to capital allocation, balanced between reinvestment in the business, strategic acquisitions, and shareholder returns through dividends and share repurchases, underscores its commitment to maintaining a strong financial position.
Conclusion Cummins Inc. (CMI) has demonstrated its resilience and adaptability over the course of its more than 100-year history. The company's diversified business model, commitment to innovation, and focus on environmental sustainability have positioned it as a leading global provider of power solutions.
Despite the challenges presented by market fluctuations, regulatory changes, and the ongoing energy transition, Cummins continues to navigate these evolving landscapes with strategic investments, partnerships, and a relentless pursuit of operational excellence. As the world increasingly demands cleaner and more efficient power solutions, Cummins is well-poised to capitalize on these trends and drive long-term growth and shareholder value.