01—Abstract
Summary
Summary of the 10-Q filed May 4, 2021. Cited figures are marked; the original filing is the authoritative source.
Cummins Inc. (CMI) reported a strong first quarter in 2021, with net sales increasing by 22% year-over-year to $6.1 billiona.
This growth was driven by robust demand across all operating segments and geographic regions, particularly in China and North America. Net income attributable to Cummins Inc. rose by 18% to $603 millionb, translating to a diluted earnings per share of $4.07, up from $3.41 in the prior year period. The company's financial performance benefited from higher sales volumes, improved pricing, and increased income from equity investees, although these gains were partially offset by higher variable compensation expenses and supply chain cost pressures.
The company's balance sheet remains strong, with $3.4 billionc in cash and marketable securities and access to substantial credit facilities. Cummins continued its commitment to returning capital to shareholders, repurchasing $418 million in common stock during the quarter and paying $197 million in dividends.
While the company sees positive trends for the remainder of 2021, it acknowledges challenges such as supply chain constraints, particularly semiconductor chip shortages, and potential declines in certain markets like China. Management remains optimistic about overall liquidity and the ability to fund operations, investments, and shareholder returns.
02—Key points
Key Highlights
- Net sales surged 22% to $6.1 billion in Q1 2021 compared to Q1 2020, driven by broad-based demand across segments and geographies.
- Net income attributable to Cummins Inc. increased by 18% to $603 million, with diluted EPS rising to $4.07 from $3.41.
- The Components segment showed significant growth, with sales up 43%, largely due to strong demand for emission solutions in China, India, and North America.
- The Engine and Power Systems segments also experienced robust sales increases of 14% and 16%, respectively, indicating a recovery in key markets.
- Operating income grew by 28% to $810 million, demonstrating improved profitability on higher sales and better pricing.
- The company returned significant capital to shareholders, repurchasing $418 million of stock and paying $197 million in dividends.
- Despite strong performance, Cummins faces challenges including supply chain constraints (semiconductor shortages) and potential demand moderation in China.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2021, Cummins Inc kept $0.10.
- Revenue$6.09B100.0%
- Cost of revenue−$4.61B75.6%
- Gross profit$1.49B24.4%
- Operating costs−$676.0M11.1%
- Operating income$810.0M13.3%
- Interest, other & tax−$207.0M3.4%
- Net income$603.0M9.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed May 4, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $6.09B$3.85B | +58.2% |
| Cost of Revenue | $4.61B$2.96B | +55.5% |
| Gross Profit | $1.49B$890.00M | +67.0% |
| R&D Expenses | $260.00M$189.00M | +37.6% |
| SG&A Expenses | $574.00M$470.00M | +22.1% |
| Operating Income | $810.00M$336.00M | +141.1% |
| Interest Expense | $28.00M$23.00M | +21.7% |
| Net Income | $603.00M$276.00M | +118.5% |
| EPS (Basic) | $4.10$1.87 | +119.3% |
| EPS (Diluted) | $4.07$1.86 | +118.8% |
| Shares Outstanding (Basic) | 147.00M147.60M | −0.4% |
| Shares Outstanding (Diluted) | 148.30M148.00M | +0.2% |
05—Questions
Frequently Asked Questions
What was the main driver behind Cummins' significant revenue growth in Q1 2021?
The primary driver for the 22% year-over-year increase in net sales was higher demand across all operating segments and most geographic regions. This was particularly strong in international markets, notably China, and in North America for the on-highway and components businesses, benefiting from an improved COVID-19 environment compared to the prior year.
How did supply chain issues impact Cummins' Q1 2021 results?
While demand was strong, Cummins experienced incremental costs associated with supply chain constraints, including higher premium freight costs. The company also noted the ongoing challenge of semiconductor chip shortages, which could lead to manufacturing delays and potentially impact future sales.
What is Cummins' outlook for the remainder of 2021, and what are the key challenges?
Cummins anticipates continued positive trends, including strong demand for pick-up trucks and improving medium-duty and heavy-duty truck markets in North America, as well as an improving aftermarket business. However, key challenges include ongoing supply constraints driven by high demand, particularly semiconductor shortages, potential declines in certain markets like China from record 2020 levels, and uncertainties related to international trade agreements.
How did the company manage its financial resources and return capital to shareholders?
Cummins maintained a strong liquidity position with $3.4 billion in cash and marketable securities and access to substantial credit facilities. During the quarter, the company demonstrated its commitment to shareholder value by repurchasing $418 million of its common stock and paying $197 million in dividends.
06—Continue