COLUMBUS, Ind. — Cummins Inc. reported an increase in revenue during the third quarter boosted by strong demand across most global markets, with the company raising its revenue forecast for the year.
The Columbus-based company reported $8.4 billion in revenue during the July-September period, a 15% increase from the same period last year. Sales in North America increased 16%, while international revenues increased 13% due to the addition of Meritor and strong demand across most global markets.
On a per-share basis, Cummins reported net income of $4.59, up from $2.82 a year ago.
Cummins’ third-quarter revenue topped Wall Street expectations of $8.18 billion, while earnings-per-share missed estimates of $4.67.
Overall, the company is now projecting its full-year revenues will be 18% to 21% this year due to strong demand across most markets, especially North America. Cummins previously projected that revenues would be up 15% to 20%.
“We delivered solid profitability and record operating cash flow in the third quarter,” Cummins Chair and CEO Jennifer Rumsey said.
While Cummins increased its full-year revenue forecast for 2023 and officials characterized the year as “another record year for revenue growth,” the company warned of slowing demand in certain markets in the fourth quarter.
Rumsey said the company is “seeing signs of moderating demand in some markets” in the October-December period, including softening aftermarket demand, continued weak outlook in China, inventory management efforts in several markets and continued industry supply chain constraints that are impacting truck production in North America.
As a result, Cummins is “taking steps to reduce costs and position the company for success in 2024,” Rumsey said.
“In view of the lower forecasted revenues, we have initiated actions to reduce costs in our business,” Rumsey said during an earnings conference call on Thursday. “…In order to lower costs as we move into next year, we are offering voluntary retirements and a voluntary separation program in select regions and parts of our business for eligible exempt employees.”
“We will continue to monitor our end markets closely and assess the need for further action while continuing to invest for our future,” Rumsey added.
Local analysts said that Cummins posted a strong quarter, particularly given the economic environment, and agreed that the company is well run and does a good job of getting ahead of any potential slowdowns.
Craig Kessler, president and chief investment officer at Columbus-based Kessler Investment Group, which currently owns shares of Cummins, said the company does “a pretty good job of keeping their finger on the pulse of the economy and getting ahead of any slowdown.”
“I think they’re going to manage through this pretty well,” Kessler said. “Our expectations are that a recession is coming in 2024, but it should be a shallow one. If that is the case, Cummins, I think, is going to manage through that very well, and I would be surprised if there is any dramatic impact on Columbus in terms of layoffs or widespread cuts.”
Roger Lee, director of research at Columbus-based Kirr, Marbach and Co., said he expects overall demand to moderate but “there is no impending doom, no shock.”
“If you zoom out, I think everyone knows that … the demand environment is kind of shaky,” Lee said. “…Basically, (Cummins) is reassuring you that they’re going to finish the year strong, but they were definitely a little cautious on the fourth quarter.”
At the same time, Lee said Cummins appears to be positioning itself well for the future.
“They’re leaning not just on the hydrogen and the electrolyzers,” Lee said. “They’re leaning into a lot of things where in the future they’re really setting (themselves) up for success because they have the capital to invest while a lot of their peers might not.”
Components: Sales of $3.2 billion were up 20% compared to the same quarter last year. Revenues in North America increased 21%, and international sales increased 19% due to an additional month of Meritor operations and increased global demand.
Engine: Sales of $2.9 billion represented a 5% increase compared to a year ago. On-highway revenues rose 8% driven by strong demand in the North American truck market and pricing actions. Sales increased 5% in North America and grew 7% in international markets due to an increase in global demand.
Distribution: Sales of $2.5 billion were up 13% compared to the same period last year. Revenues in North America increased 14%, and international sales increased 11%. Higher revenues were driven by increased demand for whole goods, especially power generation products, and pricing actions.
Power systems: Sales of $1.4 billion represented a 7% compared to the same quarter last year. Power generation revenues increased 15% driven by increased global demand and pricing actions. Industrial revenues decreased 2% due to lower mining aftermarket parts demand.