Cummins Inc. First Quarter Shows Mixed Segment Results – RVBusiness – Breaking RV Industry News
COLUMBUS, Ind. – Cummins Inc. (NYSE: CMI) today reported results for the first quarter of 2024.
Highlights included:
- First quarter revenues of $8.4 billion; GAAP1 Net Income of $2.0 billion
- EBITDA in the first quarter was 30.6% of sales; Diluted EPS of $14.03
- First quarter results include a net gain of $1.3 billion, or $9.08 per diluted share, related to the separation of Atmus and $29 million, or $0.15 per diluted share, of restructuring expenses.
- The company is raising its guidance for full year 2024 revenue and EBITDA after adjusting for the separation of Atmus.
- Full year revenues are expected to decline 2% to 5%; prior guidance was also down 2% to 5% but assumed the inclusion of Atmus revenues for the full year.
- EBITDA is now expected to be in the range of 14.5% to 15.5%; an increase from previous guidance of 14.4% to 15.4% which also included Atmus for the full year.
“We continued to see strong demand from customers in the first quarter of 2024, reflecting the quality and performance of our products,” said Jennifer Rumsey, Chair and CEO. “We delivered solid profitability and also completed the separation of Atmus, allowing Cummins to continue its focus on advancing innovative power solutions and positioning Atmus to pursue its own plans for profitable growth. I am deeply appreciative of our Cummins employees across the globe, whose broad expertise and diverse perspectives are driving our ability to innovate for our customers and meet global demand.”
First quarter revenues of $8.4 billion decreased 1% from the same quarter in 2023. Sales in North America were flat, and international revenues decreased 1% due to lower demand in China and Europe.
Net income attributable to Cummins in the first quarter was $2.0 billion, or $14.03 per diluted share, compared to $790 million, or $5.55 per diluted share, in 2023. The results reflect the gain related to the separation of Atmus, net of transaction costs and other expenses, of $1.3 billion, or $9.08 per diluted share, and restructuring expenses of $29 million, or $0.15 per diluted share. The first quarter of 2023 included costs related to the separation of Atmus of $18 million, or $0.10 per diluted share. The tax rate in the first quarter was 8.7%, primarily due to the nontaxable gain on the separation of Atmus.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the first quarter were $2.6 billion, or 30.6% of sales, compared to $1.4 billion, or 16.1% of sales, a year ago. EBITDA for the first quarter of 2024 and the first quarter of 2023 included the gain and costs noted above.
2024 Outlook
Based on its current forecast, Cummins projects full year 2024 revenues to decline 2% to 5% on a year-over-year basis, and EBITDA to be in the range of 14.5% and 15.5% of sales. The prior guidance, which was also a decline of 2% to 5%, assumed the inclusion of the financial results of Atmus for the full year. Due to strong global demand, the revenue guidance is unchanged as compared to the prior guidance despite the separation of Atmus. The current EBITDA guidance is an increase from the prior guidance of between 14.4% and 15.4%.
Cummins 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% 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 expectations on revenue and profitability for 2024 due to continued demand for Cummins’ products and services. We do still expect slowing demand in some of our key markets in the second half of the year,” said Rumsey. “Despite lower sales, Cummins is in a strong position to keep investing in future growth, bringing new technologies to customers and returning cash to shareholders.”
First Quarter 2024 Highlights
- In March, Cummins finalized the separation of Atmus Filtration Technologies Inc. through a share exchange offer in which shareholders had the option to exchange their shares of Cummins common stock for shares of Atmus. Following completion of the exchange offer, Cummins did not retain any outstanding shares of Atmus common stock.
- Accelera™ by Cummins, Daimler Trucks & Buses and PACCAR selected Marshall County, Mississippi, as the future site of advanced battery cell manufacturing for their planned joint venture. The joint venture will localize battery cell production for commercial electric vehicles and is expected to create more than 2,000 U.S. manufacturing jobs, with the option for further expansion as demand grows. The 21-gigawatt hour (GWh) factory is expected to begin producing battery cells in 2027.
- Cummins re-introduced the fuel agnostic platforms with a name that captures the innovation that powers the business forward, the Cummins HELM™ platforms. With higher efficiency, lower emissions and multiple fuels, the Cummins HELM™ platforms give customers control of how they navigate their own journeys as part of the energy transition. As the next product in the Cummins HELM™15-liter platform, Cummins announced it will launch the next generation diesel X15 in North America for the heavy-duty on-highway market which will be compliant with U.S. EPA and CARB 2027 aligned regulations at launch.
- In April, Cummins Power Generation introduced four new generator sets to the award-winning Centum™ Series, two each powered by Cummins’ QSK50 and QSK78 engines. In response to high market demand, these new models have been engineered specifically for the most critical applications such as data centers, healthcare facilities and wastewater treatment plants. These products build on decades of experience meeting our customers’ needs and deliver a step-change improvement in power density, assured reliability, sustainability and low emissions.
- Cummins received several prestigious honors during the quarter including being ranked in the Financial Times Diversity Leaders list for the third consecutive year, winning the World 50 Inclusion & Diversity Impact Award, and being named industry leader in the Commercial Vehicle and Machinery category for America’s Most JUST Companies list. Also, Cummins was named a 2024 Handshake Early Talent Award winner for its role in shaping the workforce of the future and was recognized as a 2024 Top Hispanic Employer by DiversityComm Magazine.
1 Generally Accepted Accounting Principles in the U.S.
First quarter 2024 detail (all comparisons to same period in 2023)
Components Segment
- Sales – $3.3 billion, down 6%
- Segment EBITDA – $473 million, or 14.2% of sales, which includes $21 million of costs related to the separation of Atmus compared to $507 million, or 14.3% of sales, which includes $12 million of costs related to the separation of Atmus
- Revenues in North America decreased by 5% and international sales decreased by 8% primarily due to lower demand in China and Europe.
Engine Segment
- Sales – $2.9 billion, down 2%
- Segment EBITDA – $414 million, or 14.1% of sales, compared to $457 million, or 15.3% of sales
- On-highway revenues increased 1% driven by continued strong demand in the North American medium-duty truck market and pricing actions.
- Sales were flat in North America and decreased 8% in international markets due to lower demand in China and Europe.
Distribution Segment
- Sales – $2.5 billion, up 5%
- Segment EBITDA – $294 million, or 11.6% of sales, compared to $335 million, or 13.9% of sales
- Revenues in North America increased 2% and international sales increased by 14%.
- Higher revenues were driven by increased demand for power generation products and pricing actions.
Power Systems Segment
- Sales – $1.4 billion, up 3%
- Segment EBITDA – $237 million, or 17.1% of sales, compared to $219 million, or 16.3% of sales
- Power generation revenues increased 11% driven by increased global demand, particularly for the data center market. Industrial revenues decreased 8% primarily due to weaker demand in oil and gas markets.
Accelera Segment
- Sales – $93 million, up 9%
- Segment EBITDA loss – $101 million
- Revenues increased due to increased electrolyzer installations.
- 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. The company continues to make investments to support our customers through the energy transition and deliver future profitable growth.
