10-QPeriod: Q3 FY2024

CUMMINS INC Quarterly Report for Q3 Ended Sep 30, 2024

Filed November 5, 2024For Securities:CMI

Summary

Cummins Inc. reported solid financial results for the third quarter and first nine months of 2024. Net sales showed modest growth year-over-year, driven by strong performance in the Distribution and Power Systems segments, particularly in power generation markets. The company successfully navigated the divestiture of Atmus Filtration Technologies, which significantly impacted segment sales comparisons but resulted in a substantial gain. Profitability saw a significant boost, largely due to this divestiture gain and improved gross margins, reflected in a substantial increase in net income and earnings per diluted share compared to the prior year. Operationally, the company maintained a strong liquidity position with ample cash reserves and credit facilities. The company also made significant progress in addressing its regulatory liabilities, having made the majority of the required payments under the Settlement Agreements. Looking ahead, Cummins anticipates continued strength in medium-duty trucks and aftermarket services, though it expects a modest weakening in heavy-duty truck demand and acknowledges ongoing inflationary pressures. Overall, the company demonstrates resilience and strategic execution amidst market dynamics and significant one-time events.

Financial Highlights

54 data points
Beta

Revenue

$8.46B

25.7% Gross Margin

Net Income

$809.00M

9.6% Net Margin

EPS (Diluted)

$5.86

Total Assets

$32.05B

Cash & Equivalents

$1.73B

Free Cash Flow

$381.00M

Financial Statements
Beta
Revenue$8.46B
Cost of Revenue$6.29B
Gross Profit$2.17B
R&D Expenses$359.00M
SG&A Expenses$807.00M
Operating Income$1.05B
Interest Expense$83.00M
Net Income$809.00M
EPS (Basic)$5.90
EPS (Diluted)$5.86
Shares Outstanding (Basic)137.20M
Shares Outstanding (Diluted)138.10M

Key Highlights

  • 1Net sales for the three months ended September 30, 2024, were $8.46 billion, a slight increase of 0.3% compared to $8.43 billion in the prior year period.
  • 2Net income attributable to Cummins Inc. surged to $809 million ($5.86 per diluted share) for the third quarter of 2024, up from $656 million ($4.59 per diluted share) in the same period last year.
  • 3The nine-month period saw a significant net income increase to $3.53 billion ($25.31 per diluted share) from $2.17 billion ($15.19 per diluted share) in the prior year, heavily influenced by a $1.3 billion gain from the Atmus divestiture.
  • 4The divestiture of Atmus Filtration Technologies was completed in March 2024, impacting segment sales comparisons but generating a significant gain recognized in "Other income, net."
  • 5The company made $1.9 billion in payments related to the Settlement Agreements with environmental regulatory agencies in the second quarter of 2024.
  • 6Distribution and Power Systems segments showed strong growth, up 16% and 17% respectively in Q3, driven by power generation demand.
  • 7The company maintained a strong liquidity position with $2.3 billion in cash and marketable securities and access to $4.0 billion in credit facilities.

Frequently Asked Questions

The divestiture of Atmus Filtration Technologies, completed in March 2024, had a mixed impact. While it led to a significant $1.3 billion gain recognized in "Other income, net" for the nine-month period, boosting net income and EPS, it also resulted in a decrease in the Components segment's sales and EBITDA, as Atmus was previously part of this segment. The company noted that the divestiture partially offset revenue growth in other areas.

Cummins reached final Settlement Agreements with the EPA, CARB, and other agencies regarding emissions certification and compliance. In the second quarter of 2024, the company made $1.9 billion in payments required by these agreements. While the majority of payments have been made, the company continues to monitor for any potential stipulated penalties due to non-compliance and acknowledges that further regulatory reviews are possible.

Revenue growth in the third quarter was primarily driven by the Distribution segment (up 16%) and the Power Systems segment (up 17%). This increase was largely attributed to higher demand in power generation markets, particularly for data centers, and in North America and Europe. Growth in the Engine segment was also positive year-to-date, led by medium-duty truck demand, though heavy-duty truck demand showed a modest decline in the outlook.

Cummins maintains a strong liquidity position with $2.3 billion in cash and marketable securities and access to $4.0 billion in revolving credit facilities. The company issued $2.25 billion in senior unsecured notes in February 2024 to refinance debt and fund settlement payments. Its debt-to-capital ratio remained stable at 40.1% as of September 30, 2024. The company also has supply chain financing programs and an accounts receivable sales agreement to manage working capital.