Cummins Reports Record First Quarter 2023 Results

Cummins Inc. (NYSE: CMI) today reported results for the first quarter of 2023.
 
First quarter revenues of $8.5 billion increased 32 percent from the same quarter in 2022. Sales in North America increased 39 percent and international revenues increased 24 percent due to the addition of Meritor and strong demand across all key global markets.

“The company achieved record revenues, EBITDA and EPS in the first quarter of 2023, with demand for our products remaining strong across most of our key markets and regions,” said Jennifer Rumsey, President and CEO. “We are delivering cycle-over-cycle improvement in financial performance despite persistent supply chain constraints, and we continue to invest in sustainable solutions that will protect our planet for future generations and support the success of our customers.”

Net income attributable to Cummins in the first quarter was $790 million, or $5.55 per diluted share compared to $418 million, or $2.92 per diluted share, in 2022, which included $158 million, or $1.03 per diluted share, of costs related to the indefinite suspension of operations in Russia. Results included costs associated with the separation of the Filtration business of $18 million, or $0.10 per diluted share, in the first quarter of 2023, and $17 million, or $0.09 per diluted share, in the first quarter of 2022. The tax rate in the first quarter was 21.7 percent including $3 million, or $0.02 per diluted share, of favorable discrete tax items.

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter were $1.4 billion, or 16.1 percent of sales, compared to $755 million, or 11.8 percent of sales, a year ago. EBITDA for the first quarter of 2023 included the costs related to the separation of the Filtration business and the first quarter 2022 EBITDA included the costs related to the indefinite suspension of operations in Russia and costs related to the separation of the Filtration business as noted above.

2023 Outlook: 

Based on its current forecast, Cummins is raising its full year 2023 revenue guidance to be up 15 to 20 percent, an increase from our prior projections of up 12 to 17 percent due to stronger demand across most markets. EBITDA is expected to be in the range of 15.0 to 15.7 percent, an increase from the prior range of 14.5 and 15.2 percent of sales.

The outlook above includes the projected results of the Meritor business for 2023, but excludes any costs or benefits associated with the planned separation of the Filtration business. Within the Components Segment, Cummins expects revenues of the Meritor business for 2023 to be between $4.7 billion to $4.9 billion, an increase from $4.5 billion to $4.7 billion previously, and EBITDA to be in the range of 10.3 to 11.0 percent of sales, consistent with prior guidance.

The company plans to continue to generate strong operating cash flow and returns for shareholders and is committed to our long-term strategic goal of returning 50 percent of operating cash flow back to shareholders. In the near term, we will focus on reinvesting for profitable growth, dividends and reducing debt.

“We have raised our guidance on revenue and profitability for 2023 due to continued demand for Cummins’ products and services. We will continue monitoring global economic indicators closely to ensure we are prepared should economic momentum slow,” said Rumsey. “Cummins is in a strong position to keep investing in future growth, bringing new technologies to customers and returning cash to shareholders.”

First Quarter 2023 Highlights: 

• In March, Cummins announced the launch of Accelera by Cummins, a new brand for its New Power business unit. Accelera provides a diverse portfolio of zero-emissions solutions for many of the world’s most vital industries empowering customers to accelerate their transition to a sustainable future.
• Accelera announced that it will supply a 90-megawatt (MW) proton exchange membrane (PEM) electrolyzer system for Varennes Carbon Recycling’s (VCR) plant in Quebec, Canada – a key step in advancing North America’s green hydrogen economy.
• Progress continues to be made on the planned separation of the Filtration business. In February, the company announced that its Filtration business, Atmus Filtration Technologies, has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission for a proposed underwritten initial public offering of newly issued common stock.
• Cummins received several prestigious honors during the quarter including being named to Ethisphere’s World’s Most Ethical Companies list for the 16th consecutive year. Also, Cummins was one of 66 companies honored as America’s Top Corporations for Women’s Business Enterprises in 2023 for the way it works with women-owned businesses and was recognized as a 2023 Military Friendly Employer, receiving the bronze designation for creating sustainable and meaningful benefits for the military community. 

¹ Generally Accepted Accounting Principles in the U.S. 

First quarter 2023 detail (all comparisons to same period in 2022): 

Components Segment 

• Sales - $3.6 billion, up 79 percent
• Segment EBITDA - $507 million, or 14.3 percent of sales, which includes $12 million of costs related to the separation of the Filtration business compared to $320 million, or 16.1 percent of sales, which includes $6 million of costs from the indefinite suspension of operations in Russia
• Revenues in North America increased by 87 percent and international sales increased by 69 percent due to the addition of Meritor and increased global demand.

Engine Segment 

• Sales - $3.0 billion, up 8 percent
• Segment EBITDA - $457 million, or 15.3 percent of sales, compared to $390 million or 14.2 percent of sales, which includes $32 million of costs from the indefinite suspension of operations in Russia
• On-highway revenues increased 9 percent driven by strong demand in the North American truck market, pricing actions and strong aftermarket demand. 
• Sales increased 9 percent in North America and grew 8 percent in international markets due to an increase in China and India demand.

Distribution Segment 

• Sales - $2.4 billion, up 14 percent 
• Segment EBITDA - $335 million, or 13.9 percent of sales, compared to $110 million, or 5.2 percent of sales, which includes $100 million of costs from the indefinite suspension of operations in Russia
• Revenues in North America increased 24 percent and international sales decreased by 5 percent.
• Higher revenues were driven by increased demand for parts, service, and whole goods and pricing actions.

Power Systems Segment 

• Sales - $1.3 billion, up 16 percent
• Segment EBITDA - $219 million, or 16.3 percent of sales, compared to $90 million, or 7.8 percent of sales, which includes $20 million of costs from the indefinite suspension of operations in Russia
• Power generation revenues increased 16 percent driven by increased global demand and pricing actions. Industrial revenues increased 16 percent due to strong demand for aftermarket products and increased demand in oil and gas markets.

Accelera Segment 

• Sales - $85 million, up 174 percent
• Segment EBITDA loss - $94 million
• Revenues increased due to higher demand for battery electric systems in the North American school bus market and the additions of the electric powertrain portion of the Meritor business and Siemens Commercial Vehicle business.
• Costs associated with the development of electric powertrains, fuel cells and electrolyzers, as well as products to support battery electric vehicles are contributing to EBITDA losses.