Cummins reports first quarter 2022 results

Cummins Inc. (NYSE: CMI) today reported results for the first quarter of 2022.

First quarter revenues of $6.4 billion increased 5 percent from the same quarter in 2021. Sales in North America increased 12 percent while international revenues decreased 3 percent, driven primarily by a slowdown in China. 

“Demand for our products remains strong across many of our key markets and regions, resulting in record revenues in the first quarter of 2022,” said Chairman and CEO Tom Linebarger. “We have implemented pricing actions to counter rising input costs, which contributed to solid profitability in the first quarter. Supply chain constraints continue to be a challenge and are limiting growth in our industry.”

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter were $755 million (11.8 percent of sales), compared to $980 million (16.1 percent of sales) a year ago. 

Net income attributable to Cummins in the first quarter was $418 million ($2.92 per diluted share) compared to $603 million ($4.07 per diluted share) in 2021. First quarter results include costs of $158 million ($1.03 per diluted share) related to the indefinite suspension of operations in Russia, and $17 million ($0.09 per diluted share) related to the separation of the Filtration business. The costs incurred relating to the indefinite suspension of our operations in Russia include inventory write-downs, reserves on accounts receivable, the impairment of a joint venture investment, and other costs. The tax rate in the first quarter was 26.8 percent including $31 million, or $0.22 per share, of unfavorable discrete items.

2022 Outlook:

Based on the current forecast, Cummins is raising its full year 2022 revenue guidance to up 8 percent, an increase from up 6 percent due to stronger demand in North America and other markets. Full-year 2022 EBITDA is expected to be approximately 15.5 percent, in line with our previous guidance. The company plans to return approximately 50 percent of Operating Cash Flow to shareholders in the form of dividends and share repurchases. 

Any expenses outside of the normal course of business associated with the separation of the Filtration business or indefinite suspension of our operations in Russia have been excluded from the outlook provided. 

“We delivered solid financial performance in the first quarter in the face of many challenges in our global supply chain. The ongoing impact of COVID-19, especially in China, and the effect of the conflict in Ukraine continue to present challenges to our global operations.  I am impressed with the resiliency of our employees to navigate through these difficulties and deliver for our customers. Cummins is in a strong position to keep investing in future growth, bringing new technologies to customers and returning cash to shareholders.” said President and COO Jennifer Rumsey. 

First Quarter 2022 Highlights:

• The company announced two significant acquisitions critical to advancing its product decarbonization goals while expanding its product portfolio, the acquisition of Jacobs Vehicle Systems (JVS) and the intent to acquire Meritor. JVS is a supplier of engine braking, cylinder deactivation, start and stop and thermal management technologies which are key components to meeting current and future emissions regulations. The integration of Meritor, a global leader of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicle and industrial markets will position Cummins as one of the few companies able to provide integrated powertrain solutions across combustion as well as electric power applications through Meritor’s eAxle product.
• Cummins was named one of the World’s Most Ethical Companies for a 15th consecutive time by Ethisphere, a global leader in defining and advancing the standards of ethical business practices. The company also earned a place on Barron’s 100 Most Sustainable U.S. Companies list, and received a perfect score on the Human Rights Campaign’s 2022 Corporate Equality Index for the 18th consecutive year. 
• Cummins hosted its biennial analyst day highlighting its long-term decarbonization growth strategy, Destination Zero, which includes making meaningful reductions in carbon emissions through advanced internal combustion technologies widely accepted by the market today, while continuing to invest in and advance zero emission technologies ahead of widespread market adoption. 
• In February, Cummins unveiled the industry’s first unified, fuel-agnostic internal combustion powertrain platforms. This technology approach will be applied across Cummins’ X-Series, L-Series and B-Series product platforms, and helps fleets reduce carbon emissions today by enabling vehicles to run on low to zero carbon fuels. The platform utilizes the internal combustion engine technology that fleets are already familiar with while also applying a high level of parts and integration commonality across fuels including diesel, natural gas, hydrogen or other fuel applications.
• The New Power business continued to expand its green hydrogen presence globally. In North America, Florida Power & Light Company announced Cummins will supply a 25-megawatt electrolyzer system for the groundbreaking FPL Cavendish NextGen Hydrogen Hub – Florida’s first of its kind “green” hydrogen plant. The FPL Cavendish NextGen Hydrogen Hub will leverage solar energy to power the electrolysis process that produces “green,” or carbon-free, hydrogen from water.

¹ Generally Accepted Accounting Principles in the U.S.

First quarter 2022 detail (all comparisons to same period in 2021):

The Engine, Distribution, Components and Power Systems results were all impacted by costs associated with the indefinite suspension of our operations in Russia.

Engine Segment

• Sales - $2.8 billion, up 12 percent
• Segment EBITDA - $392 million, or 14.2 percent of sales, compared to $354 million or 14.4 percent of sales. EBITDA includes $32 million of costs related to the indefinite suspension of our operations in Russia
• On-highway revenues increased 14 percent driven by pricing actions and strong demand in the North American truck markets, and recovery in the bus market which was severely impacted by Covid-19. Off-highway revenues increased 5 percent
• Sales increased 15 percent in North America and 4 percent in international markets

Distribution Segment

• Sales - $2.1 billion, up 15 percent
• Segment EBITDA - $110 million, or 5.2 percent of sales, compared to $160 million or 8.7 percent of sales. EBITDA includes $100 million of costs related to the indefinite suspension of our operations in Russia
• Revenues in North America increased 17 percent and international sales increased by 13 percent
• Higher revenues were primarily driven by increased demand for parts and whole goods

Components Segment

• Sales - $2.0 billion, down 8 percent
• Segment EBITDA - $320 million, or 16.1 percent of sales, compared to $421 million or 19.6 percent of sales. EBITDA includes $6 million of costs related to the indefinite suspension of our operations in Russia
• Revenues in North America increased by 8 percent and international sales decreased by 21 percent due to lower demand in India and China from record demand in the first quarter of 2021

Power Systems Segment

• Sales - $1.2 billion, up 14 percent 
• Segment EBITDA - $90 million, or 7.8 percent of sales, compared to $126 million, or 12.3 percent of sales. EBITDA includes $20 million of costs related to the indefinite suspension of our operations in Russia
• Power generation revenues increased by 9 percent driven by strong demand in China. Industrial revenues increased 21 percent due to stronger demand in mining and oil and gas markets

New Power Segment

• Sales - $31 million, down 11 percent
• Segment EBITDA loss - $67 million
• Revenues decreased due to timing of commissioning electrolyzer projects and shipments of fuel cell systems to the rail market in 2021
• Costs associated with the development of fuel cells and electrolyzers as well as products to support battery electric vehicles are contributing to EBITDA losses

Presentation of Non-GAAP Financial Information
EBITDA is a non-GAAP measure used in this release and is defined and reconciled to what management believes to be the most comparable GAAP measure in a schedule attached to this release. Cummins presents this information as it believes it is useful to understanding the Company's operating performance, and because EBITDA is a measure used internally to assess the performance of the operating units.

Webcast information
Cummins management will host a teleconference to discuss these results today at 10 a.m. EST. This teleconference will be webcast and available on the Investor Relations section of the Cummins website. Participants wishing to view the visuals available with the audio are encouraged to sign-in a few minutes prior to the start of the teleconference.