Mike Wolanin | The Republic An exterior view of Cummins Columbus Engine Plant in Columbus, Ind., Friday, Oct. 7, 2022.
Cummins Inc. reported that its revenue in the third quarter was roughly flat compared to a year ago, as increased sales in the company’s distribution and power systems businesses offset what company officials described as softening in the North American heavy-duty truck market.
The Columbus-based company on Tuesday reported $8.5 billion in revenue during the July-September period, which was flat compared to the third quarter last year. Sales in North America decreased 1%, while international revenues increased 2%.
On a per share basis, Cummins reported net income of $5.86 during the third quarter, up from $4.59 a year ago, though the 2023 figure included costs of $0.14 per share related to the separation of the company’s filtration business, now a standalone company called Atmus Filtration Technologies Inc.
Cummins’ third-quarter revenue this year topped Wall Street expectations of around $8.29 billion and earnings per share expectations of $4.81.
“Demand for our products remained strong across many of our key markets and regions, offset by softening in the North American heavy-duty truck market that was in line with our expectations,” Cummins Chair and CEO Jennifer Rumsey said Tuesday during an earnings call.
Segment performances
Components: Sales of $2.7 billion in the third quarter represented a decrease of 16% compared to the same period in 2023, the company said. Revenues in North America decreased 14% and international sales decreased 18% primarily due to the separation of Atmus and lower demand in the heavy-duty truck market.
Engine: Sales of $2.9 billion were down 1% compared to the same quarter last year. Revenues decreased 2% in North America and increased 4% in international markets due to softening demand in the North American heavy-duty truck market and strength in global medium-duty truck markets.
Distribution: Sales of $3 billion represented a 16% increase compared to the third quarter of 2023. Revenues in North America increased 13% and international sales rose 25% driven by increased demand for power generation products, particularly for data center applications, and pricing actions.
Power systems: Sales of $1.7 billion rose 17% compared to the same period in 2023. Power generation revenues increased 24% driven by increased global demand, particularly for the data center market. Industrial revenues increased 7% largely due to strong mining demand more than offsetting weaker oil and gas markets.
Accelera: Sales of $110 million were up 7% compared to the third quarter 2023. Costs associated with the development of electric powertrains, fuel cells and electrolyzers, as well as products to support battery electric vehicles, are contributing to losses in the segment’s earnings before interest, taxes, depreciation and amortization (EBITDA), a measure of overall financial performance.
Future outlook
Cummins said it is currently maintaining its revenue forecast for 2024 despite slowing demand in the North American heavy-duty truck market during the third quarter, a trend that Rumsey said she expects to “persist into the fourth quarter.”
Overall, the company is projecting that its revenues will be down 3% to flat this year compared to last year. In August, Cummins raised its revenue forecast for 2024 to its current level due to stronger than expected demand across several markets, especially in North America on-highway and power generation markets.
Rumsey also said Cummins plans to work with a future Harris or Trump administration and both parties in Congress to “engage on issues that are important for our business and our industry.”
“At the end of the day, Cummins is going to do what we’ve always done,” Rumsey said on Tuesday. “We’re going to work across party lines and engage on issues that are important for our business and our industry. We’ve done that with the Biden administration, the past Trump administration, we’ll do it with the next administration.”
Analysts react
Local analysts agreed that Cummins had what they described as a “good” quarter, pointing to, among other things, the increase in revenue in the company’s power systems business.
While Cummins is best known historically for making diesel engines for heavy-duty trucks, the company also makes a variety of power systems, including power generators.
More recently, Cummins power has become what the company has described as “a top global provider of backup power solutions for the data center industry.” Many of these data centers are used to meet the demanding computational requirements of artificial intelligence systems.
Cummins reported that its power systems segment saw a 17% increase during the third quarter compared to the same quarter a year ago.
Roger Lee, director of research at Columbus-based Kirr, Marbach and Co., said that data center market appears to be “opening up a whole new chapter of growth” for Cummins.
“Those data centers need to have power 100% of the time,” Lee said. “…The power systems segment is just opening up a whole new chapter of growth for the company. They can’t even meet the demand. …In the long run, that’s also where you’re getting new investors taking a look at the company, since Cummins is synonymous with reliable power.”
Dan Gretzinger, a research analyst at Columbus-based Kessler Investment Group, said Cummins’ power systems results “were really strong.”
“(The data center market) is a nice little opportunity that they got working for them,” Gretzinger said. “…Data centers are where all that data is stored and analyzed, and so they need a ton of power. These generators that (Cummins) makes are a nice safety valve for them and an extra power source for them.”
“Just a really good quarter,” Gretzinger said.
