10-QPeriod: Q2 FY2024

CUMMINS INC Quarterly Report for Q2 Ended Jun 30, 2024

Filed August 1, 2024For Securities:CMI

Summary

Cummins Inc. reported a solid financial performance for the second quarter and first half of 2024. Net sales saw a modest increase of 2% for the quarter and 1% for the year-to-date, reaching $8.8 billion and $17.2 billion, respectively. This growth was primarily driven by strong demand in power generation markets and robust performance in North American on-highway truck sectors, partially offset by the divestiture of Atmus Filtration Technologies. Profitability remained strong, with net income attributable to Cummins Inc. increasing by 1% to $726 million for the quarter and a significant 80% to $2.7 billion for the year-to-date. This year-over-year improvement was substantially boosted by a large gain recognized from the Atmus divestiture in the first half of the year, alongside favorable pricing and improved gross margins. Diluted EPS also saw a notable increase, reflecting these positive trends. The company's liquidity remains strong with substantial cash and marketable securities and access to significant credit facilities. Notably, Cummins made a substantial $1.9 billion payment towards the Settlement Agreements related to emissions compliance in the second quarter.

Financial Highlights

54 data points
Beta

Revenue

$8.80B

24.9% Gross Margin

Net Income

$726.00M

8.3% Net Margin

EPS (Diluted)

$5.26

Total Assets

$31.32B

Cash & Equivalents

$1.59B

Free Cash Flow

-$1.09B

Financial Statements
Beta
Revenue$8.80B
Cost of Revenue$6.60B
Gross Profit$2.19B
R&D Expenses$379.00M
SG&A Expenses$828.00M
Operating Income$1.04B
Interest Expense$109.00M
Net Income$726.00M
EPS (Basic)$5.30
EPS (Diluted)$5.26
Shares Outstanding (Basic)137.10M
Shares Outstanding (Diluted)137.90M

Key Highlights

  • 1Net sales increased 2% year-over-year to $8.8 billion for Q2 2024 and 1% to $17.2 billion for the first half of 2024.
  • 2Net income attributable to Cummins Inc. rose 1% to $726 million for Q2 2024 and a significant 80% to $2.7 billion for the first half, largely due to the Atmus divestiture gain.
  • 3Diluted EPS increased to $5.26 for Q2 2024 and $19.42 for the first half, up from $5.05 and $10.60 in the prior year periods.
  • 4The company made a substantial $1.9 billion payment in Q2 2024 related to the emissions-related Settlement Agreements.
  • 5Total debt as a percentage of total capital increased slightly to 41.5% from 40.3% at year-end 2023.
  • 6The company declared an 8% increase in its quarterly dividend, from $1.68 to $1.82 per share.
  • 7Cash flow from operations was negative $575 million for the first half of 2024, a decrease from positive $978 million in the prior year, impacted by working capital requirements and the Settlement Agreement payments.

Frequently Asked Questions

The primary driver for the significant 80% increase in net income attributable to Cummins Inc. for the first six months of 2024 was the gain of approximately $1.3 billion recognized from the divestiture of its remaining stake in Atmus Filtration Technologies Inc. (Atmus) in March 2024.

The $1.9 billion payment for the Settlement Agreements, made in the second quarter of 2024, significantly impacted cash flow from operations. For the first six months of 2024, net cash used in operating activities was $575 million, a substantial decrease from $978 million provided by operating activities in the same period of 2023, largely due to higher working capital requirements, including this significant payment.

Cummins anticipates continued strong demand in medium-duty trucks in North America, stable or improving demand in China, and robust performance in its Power Systems business and aftermarket segments. However, challenges include an expected modest weakening in demand for heavy-duty trucks in North America in the second half of 2024, continued inflationary pressures on labor and other costs, and the financial implications of debt utilized to fund the emissions-related civil penalty payments.

The divestiture of Atmus on March 18, 2024, had a significant impact on the Components segment. For the three months ended June 30, 2024, Components segment sales decreased by 13% to $2.98 billion, with sales decreasing $417 million directly due to the Atmus divestiture. Segment EBITDA also decreased by 16% year-over-year, primarily reflecting the absence of Atmus's contribution.