Cummins Inc. reported quarterly revenue that slightly surpassed Wall Street’s expectations Tuesday, roughly one year after company officials announced that the COVID-19 pandemic and unprecedented industry-wide shutdowns had resulted in the largest quarterly revenue decline in the company’s history.
The company, which is headquartered in Columbus, said its second quarter revenue was $6.1 billion — a 59% increase from the April-June quarter last year — and reported earnings per share of $4.10. Sales in North America rose 74%, while international revenue increased 42% driven by strong demand across global markets compared to the same quarter in 2020.
By comparison, Wall Street had projected that Cummins would deliver $6.05 billion in revenue and $4.05 in earnings per share during the second quarter.
Additionally, the company maintained its projection that full-year revenue will be up 20% to 24% this year compared to 2020 and characterized demand as “remarkable” given “the challenges and uncertainty we faced during this same period last year.”
Cummins Chairman and CEO Tom Linebarger told financial analysts Tuesday that current economic trends suggest that demand will remain strong through the rest of this year and potentially extend into next year.
“Demand remained strong in the second quarter as the global economy continued to improve, driving sales growth across most businesses and regions and resulting in solid profitability,” Linebarger said. “We are encouraged by economic trends across a number of our key markets, which point to strong demand for the remainder of this year and extending into 2022.”
Segment performances:
Engine: Sales of $2.5 billion were up 75% compared to the same quarter last year. On-highway revenues increased 104% driven by strong demand in the North American truck and pickup markets. Off-highway revenues increased 10% due to strong demand in international construction markets. Sales increased 104% in North America and 26% in international markets
Distribution: Sales of $1.9 billion represented a 20% compared to the April-June quarter last year. Revenues in North America were up 18% and international sales rose 22%. Demand increased across the power generation and engine markets in addition to parts and service compared to last year.
Components: Sales of $2 billion were up 73%. Revenues in North America increased 108%, while international sales were up 46%.
Power systems: Sales of $1.1 billion increased 47%. Power generation revenues rose 54% driven by growth in recreational vehicle and datacenter markets. Industrial revenues increased 37% due to stronger demand in mining markets.
New power: Sales of $24 million represented an increase of 140%. Revenues increased due to greater demand in transit and school bus markets, as well as shipments of fuel cell systems to the rail market. Electrolyzer revenue decreased due to the timing of commissioning of projects.
Green hydrogen
Cummins officials also said that the growth of part of the company’s hydrogen business may exceed projections announced at a virtual event last year.
In November, Cummins unveiled plans for how it intends to ramp up its fuel cell and hydrogen production business in the coming years amid a global push to curb greenhouse gas emissions and avert the threat of catastrophic climate change.
Two of the clean energy technologies that company officials discussed during the event, called Hydrogen Day, included electrolyzers — which use electricity to split water molecules into hydrogen and oxygen — and hydrogen fuel cells — which essentially put the two elements back together to produce electricity and power a motor.
At the time, Linebarger projected that Cummins’ electrolyzer business could have about $400 million in annual revenues within five years.
However, Linebarger told analysts on Tuesday that the company could “exceed our targets significantly” but cautioned that “the orders aren’t in hand.”
“We project that the sum of these partnerships and where we see this decarbonizing of industries using hydrogen already will take our demand significantly over our estimate we gave at the Hydrogen Day (event),” Linebarger said.
In recent months, Cummins has announced several agreements and plans involving green hydrogen, including that the company has started testing a hydrogen-powered internal combustion engine and an agreement to partner with Iberdrola on plans for one of the world’s largest electrolyzer plants for the production of green hydrogen.
2021 outlook
Cummins said it is projecting that its full-year 2021 revenue will be up 20% to 24% compared to last year despite company officials expecting ongoing supply chain constraints to persist through the rest of the year.
Earlier this year, Cummins said it is working through a range of supply-chain challenges, including a global shortage of semiconductors and other components, with company officials acknowledging some “sporadic impact on production.”
Cummins previously said the shortages could “lead to manufacturing delays, increased costs and the loss of sales,” according to its first quarter report.
However, overall, production remains strong, company spokesman Jon Mills said in June.
Currently, “significant supply chain constraints” are being experienced industry-wide and “the continued outbreaks of COVID around the world and now the delta variant will just keep throwing more curveballs into the system,” Linebarger said Tuesday.
“Our industry continues to experience significant constraints across all of our global markets, leading to an extended period of inefficiencies and higher costs,” Linebarger said. “…While we are optimistic that the supply chain constraints will ease with time, they are likely to persist until the end of the year.”
Analysts react
Local analysts said Cummins performed well during the second quarter and were able to increase its market share as the economy continued to rebound from the pandemic.
“The results were good,” said Roger Lee, a senior research analyst with Columbus-based Kirr, Marbach and Co. “…But (company officials) did mention they were outpacing the competition. So not only was it a period of strong demand, they’re also taking market share. It was a good quarter. There weren’t any weaknesses that analysts picked at.
Lee said it was a “testament to how well the business is run” that Cummins maintained its full-year projection that revenue will be up 20% to 24% compared to last year despite company officials expecting ongoing supply chain constraints to continue for the rest of year.
“If you think about an engine and think about how many components their getting,” Lee said. “…They’re amazing at running a manufacturing business and sourcing parts. The fact that they can maintain the guidance even with the tight supply chain is just a testament to how well the business is run and how robust their labor force.”
“They have a very good infrastructure in place where even when everyone can’t find workers or find parts, they can still keep chugging along all around the world,” Lee added.
