Components continue to propel record revenues for Cummins

Cummins Inc. is reporting record revenues for 2023’s second quarter, with an impressive 31% increase over the same period last year. This growth is largely attributed to a 31% rise in sales in North America, as well as a 32% increase in international revenues stemming from the acquisition of Meritor, Inc. – finalized in August 2022 – as well as strong demand across most global markets.

(Photo: Cummins)

The company reported net income in the second quarter of $720 million compared to $702 million in 2022. Results included costs of $23 million in the second quarter of 2023 and $29 million in the second quarter of 2022 associated with the separation of Atmus Filtration Technologies as a standalone company. On May 26th, Atmus Filtration Technologies Inc. shares began trading on the New York Stock Exchange with an initial public offering (IPO).

Earnings before interest, taxes, depreciation and amortization (EBITDA) in the second quarter of 2023 were $1.3 billion, or 15.1% of sales, compared to $1.1 billion, or 16.0% of sales in 2022.

Second quarter results by segment

The Components Segment continues to power the company’s revenue growth, with sales leaping 76% compared to Q2 2022, reaching $3.4 billion in the first quarter 2023 and with an EBITDA of $486 million or 14.2% of sales. Revenue in North America increased by 70% and international sales rose 84% due to the addition of Meritor and increased global demand.

Engine sales saw a more modest but solid 8% increase to $3.0 billion for the quarter, with EBITDA up 14.2% to $425 million, vs. $421 million or 15.2% of sales in Q2 2022. Sales in North America were up 7% largely due to strong demand in the North American on-highway truck market, which saw a 7% revenue increase, and pricing actions. Sales grew 10% in international markets due to increased global demand.

Distribution saw sales climb 15% to $2.6 billion, with $299 million EBITDA, or 11.5% of sales. Revenues climbed 20% in North America, with a 5% international sales increase.

The Power Systems Segment rose 21% to $1.5 billion, with EBITDA of $201 million or 13.8% of sales, a 10.6% increase over Q2 2022. Revenues increased 30% based on global demand and pricing actions, with industrial revenues seeing 9% growth due to increased demand in the mining and oil and gas markets.

The recently formed Accelera by Cummins saw a dramatic rise in sales, up 102% to $85 million, but experienced a loss in EBITDA of $114 million. The company attributed the revenue increase to higher demand for battery-electric system in the North American school bus market and the additions of the electric powertrain portion of the Meritor business and Siemens Commercial Vehicle business. Contributing to the EBITDA losses were costs associated with the company’s continued investments in development of electric powertrains, fuel cells and electrolyzers, as well as products to support battery-electric vehicles, as it continues to support customers through the energy transition.

In the second quarter, Cummins noted that Accelera reached a milestone of backlog electrolyzer orders totaling over $500 million. 

2023 Outlook

In presenting the Q2 2023 results, Jennifer Rumsey, chair of the Cummins Board of Directors and CEO, said, “Strong demand across most of our key markets and regions resulted in record revenues and solid profitability for the company in the second quarter of 2023.”

Jennifer Rumsey, Cummins chair & CEO (Photo: Cummins)

She thanked employees for their response to deliver quality products, strengthen customer relationships and navigate continued supply chain constraints, and emphasized that Cummins is “committed to delivering cycle-over-cycle improvement in financial performance, returning cash to our shareholders and prioritizing investments to continue building our product portfolio to power our customers’ success around the world.”

Given its current forecast, Cummins is maintaining its full year 2023 revenue guidance to be up 15% to 20% due to this strong demand, particularly in North America. EBITDA is still expected to be in the range of 15.0% to 15.7% of sales.

This outlook includes the projected results of the Meritor business for 2023. It also assumes the inclusion of Atmus for the entirety of 2023, but excludes any costs or benefits associated with the planned separation of the business. Within the Components Segment, Cummins expects revenues of the Meritor business for 2023 to be between $4.7 billion to $4.9 billion and EBITDA to be in the range of 10.3% to 11.0% of sales, the company noted.

While Cummins continues to anticipate strong demand through the remainder of 2023, Rumsey said the company will continue to closely monitor global economic indicators. “Should economic momentum slow, Cummins will remain in a strong position to keep investing in future growth,” she added, “bringing new technologies to customers as we advance our Destination Zero strategy and returning cash to shareholders.”

Click here to access the full Q1 2023 earnings report.