Cummins Reports Third Quarter 2021 Results
Third quarter revenues of $6.0 billion; GAAP1 Net Income of $534 million.
Third quarter EBITDA of 14.4 percent; Diluted EPS of $3.69.
The company now expects its full year 2021 revenue to be up approximately 20.0 percent; compared to prior guidance of up 20.0 to 24.0 percent.
The company is lowering its EBITDA guidance to be approximately 15.0 percent; compared to prior guidance of 15.5 to 16.0 percent.
Cummins Inc. (NYSE: CMI) today reported results for the third quarter of 2021.
Third quarter revenues of $6.0 billion increased 17 percent from the same quarter in 2020. Sales in North America increased 13 percent while international revenues increased 22 percent driven by strong demand across all global markets outside of China compared to the same quarter in 2020.
“Demand remained strong in the third quarter as the global economy continued to improve, driving strong sales growth across most businesses and regions outside of China, which is moderating in line with expectations,” said Chairman and CEO Tom Linebarger.
“Economic trends such as order activity, freight rates, and used equipment prices remain robust across a number of our key end markets which points to strong demand extending into 2022 and beyond. Cummins is well positioned to benefit as these markets gain momentum as we continue to see orders for our products outpace our competition. Despite this strong demand, supply chain constraints continue to impact our business as well as our customers’, resulting in rising material costs, elevated logistics expenses, and other manufacturing inefficiencies and capping revenue below our expectations three months ago."
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter was $862 million (14.4 percent of sales), compared to $876 million (17.1 percent of sales) a year ago.
Net income attributable to Cummins in the third quarter was $534 million ($3.69 per diluted share) compared to $501 million ($3.36 per diluted share) in 2020. The tax rate in the third quarter was 19.9 percent including $11 million, or $0.08 per share, of favorable discrete items.
2021 Outlook:
Based on the current forecast, Cummins is lowering its full year 2021 revenue guidance to be up approximately 20 percent versus last year, compared to prior guidance of up 20 to 24 percent. EBITDA is now expected to be approximately 15.0 percent compared to previous guidance of 15.5 to 16.0 percent of sales due to the ongoing supply chain challenges in our industry. The Company expects to return over 75 percent of Operating Cash Flow to shareholders in 2021 in the form of dividends and share repurchases.
Any expenses outside of the normal course of business associated with the evaluation of strategic alternatives for the Filtration business have been excluded from the outlook provided.
Third Quarter 2021 Highlights:
- Cummins announced that it will bring to market a 15-liter natural gas engine for heavy-duty trucks. The 15-liter natural gas engine is an important part of Cummins strategy for its path to zero emissions. The strategy focuses on new powertrains including advanced diesel, natural gas, hydrogen engines, hybrids, battery electric, and fuel cells along with an increased use of low carbon fuels and renewable electricity and related infrastructure. The expanding product lineup will help achieve Cummins’ PLANET 2050 environmental goals which include lowering emissions from newly sold products by 30% by 2030 and a goal of carbon neutrality by 2050, aligned with the Paris Climate Accord targets.
- The company announced it will launch a set of software features to integrate its powertrains with Automated Driving System (ADS) technologies. Cummins is a market leader in delivering powertrains that provide leading performance and fuel economy through the integration of hardware and software. With these new software features, Cummins will extend these core capabilities into the ADS space as well. Cummins is positioned to be a leader in ADS technology integration globally and is actively testing more than 100 vehicles in coordination with ADS technology companies to ensure seamless powertrain integration as ADS solutions enter commercial vehicle markets globally.
- Cummins received two awards, totaling nearly $7 million, from the US Department of Energy for continued work on enhancing the economic viability of fuel cell powertrain solutions for heavy-duty applications, including on-highway tractor-trailers and buses. The program will drive the scale and investment needed to allow for faster adoption of hydrogen fuel cell technologies.
- The company launched Cummins Water Works, a community focused initiative to address the global water crisis around the world by bringing fresh water to 20 million people who would otherwise not have access to it. The program will partner with leading water experts and the Water Resilience Coalition to invest in sustainable, large-scale, high-impact projects in water stressed regions.
- The company administered over 30,000 vaccine doses in India, continuing its commitment to the safety of employees, joint venture partners, and suppliers and their families during the COVID-19 pandemic.
- The company announced an increase in its quarterly dividend from $1.35 to $1.45 a share.
1 Generally Accepted Accounting Principles in the U.S.
Third quarter 2021 detail (all comparisons to same period in 2020):
Engine Segment
- Sales - $2.6 billion, up 22 percent
- Segment EBITDA - $391 million, or 15.2 percent of sales, compared to $382 million or 18.1 percent of sales
- On-highway revenues increased 22 percent driven by strong demand in the North American truck market and off-highway revenues increased 21 percent driven by strong demand in North American, Asian Pacific, and European construction markets
- Sales increased 23 percent in North America and 19 percent in international markets
Distribution Segment
- Sales - $2.0 billion, up 14 percent
- Segment EBITDA - $192 million, or 9.8 percent of sales, compared to $182 million or 10.6 percent of sales
- Revenues in North America increased 10 percent and international sales increased by 21 percent
- Demand increased across the power generation and engine markets in addition to parts and service compared to last year.
Components Segment
- Sales - $1.8 billion, up 16 percent
- Segment EBITDA - $253 million, or 14.1 percent of sales, compared to $261 million or 16.9 percent of sales
- Revenues in North America increased by 21 percent and international sales increased by 11 percent
Power Systems Segment
- Sales - $1.2 billion, up 19 percent
- Segment EBITDA - $134 million, or 11.5 percent of sales, compared to $101 million, or 10.3 percent of sales
- Power generation revenues increased by 10 percent driven by growth in recreational vehicle and datacenter markets while industrial revenues increased 33 percent due to stronger demand in mining markets
New Power Segment
- Sales - $23 million, up 28 percent
- Segment EBITDA loss - $58 million
- Revenues increased due to greater demand in transit and school bus markets in addition to the shipments of fuel cell systems to the rail market. Electrolyzer revenue decreased driven by timing of commissioning of projects.
- Costs associated with the development of fuel cells and electrolyzers as well as products to support battery electric vehicles ahead of widespread adoption are contributing to EBITDA losses
Information provided in this release that is not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our forecasts, guidance, preliminary results, expectations, hopes, beliefs and intentions on strategies regarding the future. These forward-looking statements include, without limitation, statements relating to our plans and expectations for our revenues, EBITDA and agreement in principle to settle regulatory proceedings regarding our emissions certification and compliance process for pick-up truck applications. Our actual future results could differ materially from those projected in such forward-looking statements because of a number of factors, including, but not limited to: any adverse consequences resulting from entering into the Agreement in Principle, including required additional mitigation projects, adverse reputational impacts and potential resulting legal actions; increased scrutiny from regulatory agencies, as well as unpredictability in the adoption, implementation and enforcement of emission standards around the world; evolving environmental and climate change legislation and regulatory initiatives; changes in international, national and regional trade laws, regulations and policies; changes in taxation; global legal and ethical compliance costs and risks; future bans or limitations on the use of diesel-powered products; failure to successfully integrate and / or failure to fully realize all of the anticipated benefits of the acquisition of Meritor, Inc. (Meritor); raw material, transportation and labor price fluctuations and supply shortages; aligning our capacity and production with our demand; the actions of, and income from, joint ventures and other investees that we do not directly control; large truck manufacturers' and original equipment manufacturers' customers discontinuing outsourcing their engine supply needs or experiencing financial distress, or change in control; product recalls; variability in material and commodity costs; the development of new technologies that reduce demand for our current products and services; lower than expected acceptance of new or existing products or services; product liability claims; our sales mix of products; uncertainties and risks related to timing and potential value to both Atmus Filtration Technologies Inc. (Atmus) and Cummins of the planned separation of Atmus, including business, industry and market risks, as well as the risks involving the anticipated favorable tax treatment if there is a significant delay in the completion of the envisioned separation; climate change, global warming, more stringent climate change regulations, accords, mitigation efforts, greenhouse gas regulations or other legislation designed to address climate change; our plan to reposition our portfolio of product offerings through exploration of strategic acquisitions and divestitures and related uncertainties of entering such transactions; increasing interest rates; challenging markets for talent and ability to attract, develop and retain key personnel; exposure to potential security breaches or other disruptions to our information technology environment and data security; political, economic and other risks from operations in numerous countries including political, economic and social uncertainty and the evolving globalization of our business; competitor activity; increasing competition, including increased global competition among our customers in emerging markets; failure to meet environmental, social and governance (ESG) expectations or standards, or achieve our ESG goals; labor relations or work stoppages; foreign currency exchange rate changes; the performance of our pension plan assets and volatility of discount rates; the price and availability of energy; continued availability of financing, financial instruments and financial resources in the amounts, at the times and on the terms required to support our future business; and other risks detailed from time to time in our SEC filings, including particularly in the Risk Factors section of our 2023 Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are made only as of the date of this release and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. More detailed information about factors that may affect our performance may be found in our filings with the SEC, which are available at http://www.sec.gov or at http://www.cummins.com in the Investor Relations section of our website.
Cummins Inc., a global power solutions leader, comprises five business segments – Components, Engine, Distribution, Power Systems and Accelera by Cummins – supported by our global manufacturing and extensive service and support network, skilled workforce and vast technological expertise. Cummins is committed to its Destination Zero strategy, which is grounded in the company’s commitment to sustainability and helping its customers successfully navigate the energy transition with its broad portfolio of products. The products range from advanced diesel, natural gas, electric and hybrid powertrains and powertrain-related components including filtration, aftertreatment, turbochargers, fuel systems, valvetrain technologies, controls systems, air handling systems, automated transmissions, axles, drivelines, brakes, suspension systems, electric power generation systems, batteries, electrified power systems, hydrogen production technologies and fuel cell products. Headquartered in Columbus, Indiana (U.S.), since its founding in 1919, Cummins employs approximately 75,500 people committed to powering a more prosperous world through three global corporate responsibility priorities critical to healthy communities: education, environment and equality of opportunity. Cummins serves its customers online, through a network of company-owned and independent distributor locations, and through thousands of dealer locations worldwide and earned about $735 million on sales of $34.1 billion in 2023.
