Cummins reported third quarter earnings on Tuesday.
"We achieved strong sales and profitability in the third quarter, led by improvement in our power systems and distribution businesses, and have adjusted our full year projection for EBITDA (earnings before interest, taxes, depreciation and amortization) percentage to be at the top end of the prior range," says Jennifer Rumsey, Cummins' chair and CEO. "We continue to advance our Destination Zero strategy as we deliver innovative technologies for our customers, strengthen our position in key markets and drive improvement in our financial performance."
By the numbers
Third-quarter revenues were $8.5 billion, flat when compared to the same quarter in 2023. Sales in North America decreased 1%, offset by international revenues, which were up 2%. Net income in the third quarter was $809 million, compared to $656 million in 2023, which also included costs related to the separation of Atmus of $26 million.
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The third-quarter tax rate was 19.2%, including $36 million of favorable discrete tax items. Third-quarter EBITDA was $1.4 billion, or 16.4% of sales, compared to $1.2 billion, or 14.6% of sales, in 2023.
The forecast for 2024 revenue remains flat to a low of down 3%. EBITDA is expected to be in the neighborhood of 15.5%, at the top end of previous guidance. Cummins says it plans to continue generating strong operating cash flow and returns for shareholders, committed to a long-term strategic goal of returning 50% of operating cash flow back to shareholders. In the near term, the company says it will focus on reinvesting for profitable growth, dividends and reducing debt.
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"We solidified our expectations on profitability for 2024 to the top end of our prior range thanks to continued improvements in power systems and distribution segments," Rumsey says. "Although we faced slowing demand in the North American heavy-duty truck market during the third quarter and anticipate this trend to persist into the fourth quarter, Cummins remains well-positioned to deliver strong financial performance, invest in future growth and return cash to shareholders."
Broken down by segment:
- Components segment sales were down 16% to $2.7 billion. Revenues in North America were down 14% and international sales decreased by 18%. EBITDA was down for the quarter; $351 million, or 12.9% of sales, compared to $441 million, or 13.6% of sales for the same quarter in 2023. The 2023 quarter included the operating results of Atmus and $20 million in costs related to its separation.
- Engine segment sales were down 1% to $2.9 billion with a segment EBITDA was up to $427 million, or 14.7% of sales, compared to $395 million, or 13.5% of sales, in 2023. Revenues, down 2% in North America, were offset by a 4% increase in international market, largely on the strength of the global medium-duty sector.
- Distribution sales were up 16% to $3 billion with a segment EBITDA of $427 million, compared to $395 million in 2023. Both North American and international revenues were up; North America up 13% and international up 25%. Cummins says this is due to increased demand for power generation products, particularly for data center applications, and pricing actions.
- The power systems segment was another strong performer, with sales up 17% to $3 billion. Segment EBITDA was $370 million compared to $306 million the previous year. Revenues were up 24% and industrial revenues increased 7% as mining demand offset weaker oil and gas markets.
- Accelera sales were up 7% to $100 million with a segment EBITDA loss of $115 million. Cummins says revenues were up on increased electrolyzer installations. Costs associated with the development of electric powertrains, fuel cells, electrolyzers and products to support battery electric vehicles, contributed to EBITDA losses.
X15N production and innovations
Cummins started full production of the X15N natural gas engine in the third quarter. The engine, produced at the Jamestown Engine Plant, which celebrated its 50th anniversary recently. The X15N is part of Cummins' HELM global engine platform, derived from a common base and offering multiple fuel types, including natural gas, advanced diesel and hydrogen.
Cummins showed off the X15H hydrogen internal combustion engine at the IAA Transportation 2024 conference in Hannover, Germany, along with the Euro-7 ready X10, a hydrogen fuel cell engine, next-generation lithium ion phosphate battery solutions, eAxles, eTurbocharger, eCompressor, hydrogen fuel storage solutions, and fully integrated powertrains.
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Accelera by Cummins opened a new electrolyzer manufacturing plant in Spain. It has the capacity to produce 500 megawatts of electrolyzers per year and can scale to more than 1 gigawatt per year in the future.
