Cummins Inc. reported record revenue during the first three months of the year despite persistent supply chain constraints with the company raising its revenue forecast for the year.

The Columbus-based company reported a record $8.5 billion in revenue in the January-March period, up 32% compared to the first quarter last year. Sales were up 39% in North America, and international revenues increased 24%, largely due to the addition of Meritor and strong demand across all key global markets, the company said.

On a per share basis, Cummins reported net income of $5.55, up from $2.92 a year ago. Earnings per share during the first quarter 2022 included costs related to indefinitely halting operations in Russia, which resulted in a $1.03 drop in earnings per share during the January-March period last year.

Cummins’ first-quarter revenue this year topped Wall Street expectations of around $8.06 billion and earnings per share expectations of $4.73.

Overall, the company is now projecting its full-year revenues will be up 15% to 20% this year, largely fueled by stronger demand across most markets. Cummins previously projected revenues would be up 12% to 17% this year.

“Demand for our products continues to be strong across all of our key markets and regions with a slow increment in China, resulting in record revenues in the first quarter of 2023,” Cummins President and CEO Jennifer Rumsey told financial analysts on Tuesday.

Segment performances

Components: Sales of $3.6 billion were up 79% compared to the first quarter last year. Revenues in North America increased 87%, while international sales rose 69% due to the addition of Meritor and increased global demand.

Engine: Sales of $3 billion represented an increase of 8%. On-highway revenues increased 9% driven by strong demand in the North American truck market, pricing actions and strong aftermarket demand, the company said. Sales increased 9% in North America and 8% in international markets due to an increase in demand in China and India.

Distribution: Sales of $2.4 billion were up 14% compared to the January-March period last year. Revenues in North America increased 24%, and international sales fell 5%. Higher revenues were driven by increased demand for parts, service and whole goods and pricing actions, the company said.

Power systems: Sales of $1.3 billion were up 16% compared to a year ago. Power generation revenues increased 16% driven by increased global demand and pricing actions, the company said. Industrial revenues rose 16% due to strong demand for aftermarket products and increased demand in oil and gas markets.

Accelera: Sales of $85 million were up 174% compared to the first quarter last year. Revenues increased due to higher demand for battery electric systems in the North American school bus market and the additions of the electric powertrain portion of the Meritor business and Siemens Commercial Vehicle business.

2023 outlook

Company officials said the increased full-year revenue forecast for 2023 reflects an improved outlook in North America, including stronger demand for Meritor, which Cummins acquired last year.

Within Cummins’ components segment, full-year revenues of the Meritor business are projected to be $4.7 billion to $4.9 billion, up from previously projections of $4.5 billion to $4.7 billion, company officials said.

Additionally, Cummins is now projecting total revenues in China, including joint ventures, to increase 16% this year, compared to a previous projection of 7%.

“We have raised our guidance on revenue and profitability for 2023 due to continued demand for Cummins’ products and services,” Rumsey said. “We will continue monitoring global economic indicators closely to ensure we are prepared should economic momentum slow. Cummins is in a strong position to keep investing in future growth, bringing new technologies to customers and returning cash to shareholders.”

Analysts react

Local analysts agreed Cummins had a strong quarter.

Craig Kessler, president and chief investment officer at Columbus-based Kessler Investment Group, said, “It was pretty much a good quarter all the way around” and said the results could be a good sign for the broader economy.

“To me, this is a little bit of a read-through into the economy,” Kessler said. “(With) a company as conservative as Cummins suggesting that they’re going to see increased sales really across the board … this economy is not as close to the recession cliff as some would make it sound.”

For his part, Roger Lee, a senior research analyst with Columbus-based Kirr, Marbach and Co., characterized Cummins’ first-quarter results as “overwhelmingly strong.”

“It seems like management has just positioned the business really well,” Lee said. “…It seems like they’re outperforming even their own estimates. At least for the rest of the year, if you’re expecting revenues to go up by almost a fifth versus last year, then there are a lot of machines to be made, a lot of engines to be made.”