By Andy East | Aim Media Indiana

[email protected]

Cummins Inc. reported record revenue during the second quarter, largely driven by what the company described as strong demand across most global markets.

The Columbus-based company reported $8.6 billion in revenue during the April-June period, up 31% compared to the second quarter last year. Sales were up 31% in North America, while international revenues increased 32%.

On a per share basis, Cummins reported net income of $5.05, up from $4.94 a year ago. Earnings before interest, taxes, depreciation and amortization — a measure of a company’s overall financial performance — was $1.3 billion.

Cummins’ second-quarter revenue topped Wall Street revenue expectations of around $8.36 billion, as well as expectations for earnings before interest, taxes, depreciation and amortization of $1.28 billion based on figures from Bloomberg.

“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,” said Cummins Chair and CEO Jennifer Rumsey.

Segment performances

Components: Sales of $3.4 billion were up 76% from the same period a year ago. Revenues in North America increased 70%, and international sales rose 84% due to the addition of Meritor and increased global demand.

Engine: Sales of $3 billion represented an increase of 8%. On-highway revenues increased 7% driven by strong demand in the North American truck market and pricing actions. Sales increased 7% in North America and grew 10% in international markets due to an increase in global demand.

Distribution: Sales of $2.6 billion were up 15% compared to the April-June period last year. Revenues in North America increased 20%, and international sales rose 5%. Higher revenues were driven by increased demand for whole goods, especially power generation products, and pricing actions, the company said.

Power Systems: Sales of $1.5 billion were up 21% compared to a year ago. Revenues rose 30% due to increased global demand and pricing actions. Industrial revenues rose 9% due to increased demand in mining and oil and gas markets.

Accelera: Sales of $85 million represented a 102% increase compared to the same quarter a year ago. Revenues rose 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 and Siemens Commercial Vehicle businesses.

2023 outlook

Cummins said it is maintaining its 2023 full-year revenue forecast due to strong demand across most markets, especially North America. The company is currently projecting that its full-year revenues will be up 15% to 20% this year.

The 2023 outlook includes the projected full-year results of the Meritor business, which Cummins acquired last year.

Cummins said it expects the Meritor business, which is now part of its components business segment, to generate $4.7 billion to $4.9 billion in revenue this year.

“While we see demand remaining strong through 2023 and we are maintaining our guidance on revenue and profitability, we continue to closely monitor global economic indicators,” Rumsey said. “Should economic momentum slow, Cummins will remain in a strong position to keep investing in future growth, bringing new technologies to customers as we advance our Destination Zero strategy and returning cash to shareholders.”

Analysts react

Local analysts said that Cummins had a “strong” second quarter but that a decrease in the company’s stock price on Thursday likely was related to the market reading “between the lines” and inferring that the company may be seeing signs of possible softness in demand on the horizon.

“Because (Cummins) didn’t raise guidance but they delivered very strong revenue, I think the market read between the lines, and they saw it as management telegraphing a decline in momentum for the back half of the year,” said Roger Lee, director of research at Columbus-based Kirr, Marbach and Co. “…If you crush revenue for the quarter but you keep the guidance for the year, you’re implying that you’re less optimistic about the back half of the year.”

Craig Kessler, president and chief investment officer at Columbus-based Kessler Investment Group, also said he believes that Cummins management might be seeing “a little bit of softness on the horizon.”

“I think this is the first (quarter) in a while that we have detected from management that while they don’t see, in the form of orders, softness, they’re preparing,” Kessler said. “I think we have to read between the lines that management sees a little bit of softness on the horizon.”

However, Kessler said that company officials appear to “see any softness as being kind of shallow and short lived.” “They are not battening down hatches or anything dramatic like that,” he said.

Kessler said Cummins management deserves “kudos” for being able to maintain their full-year revenue guidance even as they “may be heading into a difficult macro environment even though they are not hearing it from their customers yet.”

“At the end of the day, they maintained their guidance, and that’s a little bit above what the (Wall) Street expectation was,” Kessler said. “So, taking their word at face value, the rest of this year should be in line to be slightly better than what the market expects for Cummins.”

Lee, for his part, said 2023 is still shaping up to be an “exceptional year” for Cummins, but the market is trying to figure out what 2024 may have in store.

“Even if things are slowing down, it just means that we don’t think 2024 is going to grow more than 2023, but 2023 is still an exceptional year,” Lee said.