Mike Wolanin | The Republic An exterior view of Cummins Columbus Engine Plant in Columbus, Ind., Friday, Oct. 7, 2022.
Cummins Inc. reported fourth-quarter 2022 revenue that beat Wall Street expectations as company officials said they anticipate strong demand to continue in key markets around the world this year.
The Columbus-based company reported $7.77 billion in revenue during the October-December period, up from $5.8 billion during the same quarter in 2021 and the Bloomberg estimate of $7.24 billion.
Net income during the fourth quarter was $631 million, or $4.43 per share, up from $394 million a year ago, or $2.73 per share.
Excluding results from Meritor Inc., which Cummins acquired in August, as well as costs related to integrating the two companies, Cummins’ fourth-quarter revenue was $6.6 billion and net income was $644 million, or $4.52 per share.
Full-year revenue was $28.1 billion last year, compared to $24 billion in 2021, the company said. Meritor, for its part, had $1.9 billion in revenue since Cummins acquired the company in August, Cummins said.
“We made significant strides in our inorganic growth strategy, most notably through the acquisitions of Jacobs Vehicle Systems, Meritor and the Siemens Commercial Vehicles business,” said Cummins President and CEO Jennifer Rumsey. “We also navigated complex global supply chain challenges, advanced our preparation for the separation of our filtration business and transition from (former Cummins Chairman and CEO) Tom (Linebarger) to me as the CEO. We accomplished all of this and delivered record revenues (in 2022.) …We did so with a focus on the exciting opportunity in front of us to lead the industry to a broader clean economy and do so in a way that is best for our stakeholders and the planet. Decarbonization is a growth opportunity for comments, uniting our business and climate goals.”
Segment performances:
Engine: Sales of $2.6 billion represented an increase of 9% compared to the fourth quarter 2021, the company said. Sales increased 21% in North America and decreased 16% in international markets due to a decline in demand in China and the indefinite suspension of operations in Russia.
Components: Total sales were $3.1 billion during the fourth quarter. Excluding Meritor’s results, sales were $1.9 billion, up 13% from the same period in 2021. Excluding Meritor, revenues in North America increased 23% during the fourth quarter, while international sales increased 1% as strong demand in India offset lower demand in China.
Distribution: Sales of $2.3 billion were up 13% in the October-December period compared to the same period in 2021. Revenues in North America rose 24% and international sales decreased 5%. The increase in revenue was driven by increased demand for parts, service and whole goods.
Power systems: Sales of $1.3 billion represented a 22% increase compared to the same quarter in 2021. Power generation revenues rose 25% driven by pricing actions and increased global demand, the company said. Industrial revenues increased 17% due to strong demand for aftermarket products and increased demand in mining and oil and gas markets.
New Power: Total sales were $75 million during the fourth quarter. Excluding Meritor, sales were $61 million, up 79% compared to the same period in 2021. Revenues increased due to higher battery demand in the North American school bus market and higher electrolyzer sales, the company said.
2023 outlook
Cummins officials said they expect 2023 full-year revenue to increase 12% to 17% compared to last year.
While the company has seen some macroeconomic indicators weaken in recent months, Cummins has not see a significant change in customer orders, officials said.
Rumsey said the company expects the revenue increase to be driven by, among other things, a full year of sales from Meritor, continued strength in the North American truck market, improved demand in power generation markets and a slow improvement in the China on-highway market.
Cummins officials said they anticipate that Meritor will add $4.5 billion to $4.7 billion in revenue in Cummins’ components segment in 2023.
In addition, Rumsey said that Cummins expects its full-year sales in its new power business to be $350 million to $400 million in sales, more than double the $75 million in sales in 2022, driven largely by the company’s “growing pipeline of electrolyzer orders.”
Cummins’ new power business includes low-carbon technologies that officials believe can drive growth during the energy transition. The company has said that decarbonization is a “growth opportunity” for Columbus’ largest employer.
“In 2023, we anticipate that demand will remain strong in most of our key regions and markets, especially in the first half of the year,” Rumsey said. “We will continue monitoring global economic indicators closely and ensure we are prepared should economic momentum slow further. We expect revenue growth and margin expansion in our core business and strong growth in our new power segment in 2023.”
Analysts react
Local analysts agreed that Cummins appears to be well positioned for success in 2023.
Roger Lee, a senior research analyst with Columbus-based Kirr, Marbach and Co., said the 2023 full-year revenue guidance was “pretty exceptional” with “a lot of opportunity for upside” in China while the North American market appears poised to remain strong.
“They’re calling for 12% to 17% growth, and it’s not like 2022 is a bad year either,” Lee said. “I think the one of the big things is they’re they’re definitely being conservative on the China reopening, but it seems like there’s a lot of opportunity for upside there. …I think on the North American side, the demand is very robust. They made it very clear (that) for the first half year, the core market is going to be very strong.”
Craig Kessler, president and chief investment officer at Columbus-based Kessler Investment Group, said the company’s optimism about international sales while the North American market appears likely to remain strong, along with the potential for a weaker U.S. dollar that could strengthen revenue gains from overseas operations, “bode well for 2023 and beyond for the company.”
“Book it as a solid quarter,” Kessler said. “It bodes well for the rest of this year, and I think it’s going to be a continuation of the path towards normal that we’ve all been sensing here in Columbus since COVID. I think they’re moving in the right direction, and we should all feel confident and proud of what Cummins has delivered.”
At the close
Cummins’ stock closed Monday at 250.98 down 5.13 points (2%) from Friday’s close.
