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Cummins (CMI) Q2 Earnings Disappoint on Narrowing Margins
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Cummins Inc. (CMI - Free Report) reported second-quarter 2023 earnings of $5.18 per share, which reflects an improvement from the prior-year quarter’s earnings of $4.17 per share. But the reported figure missed the Zacks Consensus Estimate of $5.19 per share. Cummins’ revenues totaled $8,638 million, up 31.2% from $6,586 million recorded in the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $8,242 million.
In the reported quarter, sales in the Engine segment were up 8% year over year to $3 billion. The metric topped our estimate of $2.99 billion. The outperformance was attributable to the increase in on-highway revenues. On-highway revenues increased by 7% due to strong demand in the North American truck market and pricing actions. The segment’s EBITDA increased to $425 million (accounting for 14.2% of sales) from $422 million (15.2% of sales) but missed our estimate of $433 million. Costs from the indefinite suspension of operations in Russia resulted in a decline in the EBITDA percentage.
Sales in the Distribution segment totaled $2.6 billion, up 15% year over year, beating our estimate of $2.46 billion. Higher sales in North America resulted in the outperformance. Revenues in North America jumped 20%, while international sales rose 5%. The segment’s EBITDA came in at $299 million (11.5% of sales) compared with the previous year’s $297 million (13.2% of sales). The metric missed our estimate of $303.5 million.
Sales in the Components segment totaled $3.4 billion, up 76% from the prior-year quarter and surpassed our estimate of $3.3 billion. Higher sales in North America and international markets resulted in the outperformance. Revenues in North America jumped 70%, while international sales rose 84%, thanks to the Meritor buyout. The segment’s EBITDA was $486 million (14.2% of sales) compared with the year-ago figure of $352 million (18.1% of sales). The decline in EBITDA percentage was driven by the addition of Meritor. The metric surpassed our estimate of $470 million.
Sales in the Power Systems segment rose 21% from the year-ago quarter to $1.5 billion, topping our estimate of $1.4 billion. An increase in power generation and industrial revenues resulted in outperformance. The segment’s EBITDA increased to $201 million (13.8% of sales) from $128 million (10.6% of sales) and beat our estimate of $176.9 million.
Sales in the Accelera segment came in at $85 million, soaring 102% from the year-ago level but missing our estimate of $89.8 million. The segment incurred a pretax loss of $114 million, which was wider than our estimate of $78.7 million. Costs associated with the development of electric powertrains, fuel cells and electrolyzers, as well as products to support battery electric vehicles, contributed to EBITDA losses.
Financials
Cummins’ cash and cash equivalents were $1,802 million as of Jun 30, 2023, down from $2,101 million on Dec 31, 2022. Long-term debt totaled $5,089 million, up from $4,498 million on Dec 31, 2022.
Reiterated 2023 Outlook
For the full-year 2023, Cummins expects revenues to grow in the range of 15-20% year over year, the same as the prior projection.
EBITDA is forecast to be in the range of 15-15.7% of sales, the same as the previous forecast.
Cummins continues to stick to its plan of returning nearly 50% of its operating cash flow to shareholders in the form of dividends and share repurchases.
The Zacks Consensus Estimate for TM’s 2023 sales and earnings implies year-over-year growth of 10.9% and 61.7%, respectively. The EPS estimate for 2023 has moved north by 21 cents in the past seven days. The 2024 EPS estimate has moved up by 20 cents in the past seven days.
The Zacks Consensus Estimate for PCAR’s 2023 sales and earnings implies year-over-year growth of 19.6% and 40.1%, respectively. The EPS estimate for 2023 has moved up by 17 cents in the past seven days. The 2024 EPS estimate has moved north by 11 cents in the past seven days.
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Cummins (CMI) Q2 Earnings Disappoint on Narrowing Margins
Cummins Inc. (CMI - Free Report) reported second-quarter 2023 earnings of $5.18 per share, which reflects an improvement from the prior-year quarter’s earnings of $4.17 per share. But the reported figure missed the Zacks Consensus Estimate of $5.19 per share. Cummins’ revenues totaled $8,638 million, up 31.2% from $6,586 million recorded in the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $8,242 million.
Cummins Inc. Price, Consensus and EPS Surprise
Cummins Inc. price-consensus-eps-surprise-chart | Cummins Inc. Quote
Key Takeaways
In the reported quarter, sales in the Engine segment were up 8% year over year to $3 billion. The metric topped our estimate of $2.99 billion. The outperformance was attributable to the increase in on-highway revenues. On-highway revenues increased by 7% due to strong demand in the North American truck market and pricing actions. The segment’s EBITDA increased to $425 million (accounting for 14.2% of sales) from $422 million (15.2% of sales) but missed our estimate of $433 million. Costs from the indefinite suspension of operations in Russia resulted in a decline in the EBITDA percentage.
Sales in the Distribution segment totaled $2.6 billion, up 15% year over year, beating our estimate of $2.46 billion. Higher sales in North America resulted in the outperformance. Revenues in North America jumped 20%, while international sales rose 5%. The segment’s EBITDA came in at $299 million (11.5% of sales) compared with the previous year’s $297 million (13.2% of sales). The metric missed our estimate of $303.5 million.
Sales in the Components segment totaled $3.4 billion, up 76% from the prior-year quarter and surpassed our estimate of $3.3 billion. Higher sales in North America and international markets resulted in the outperformance. Revenues in North America jumped 70%, while international sales rose 84%, thanks to the Meritor buyout. The segment’s EBITDA was $486 million (14.2% of sales) compared with the year-ago figure of $352 million (18.1% of sales). The decline in EBITDA percentage was driven by the addition of Meritor. The metric surpassed our estimate of $470 million.
Sales in the Power Systems segment rose 21% from the year-ago quarter to $1.5 billion, topping our estimate of $1.4 billion. An increase in power generation and industrial revenues resulted in outperformance. The segment’s EBITDA increased to $201 million (13.8% of sales) from $128 million (10.6% of sales) and beat our estimate of $176.9 million.
Sales in the Accelera segment came in at $85 million, soaring 102% from the year-ago level but missing our estimate of $89.8 million. The segment incurred a pretax loss of $114 million, which was wider than our estimate of $78.7 million. Costs associated with the development of electric powertrains, fuel cells and electrolyzers, as well as products to support battery electric vehicles, contributed to EBITDA losses.
Financials
Cummins’ cash and cash equivalents were $1,802 million as of Jun 30, 2023, down from $2,101 million on Dec 31, 2022. Long-term debt totaled $5,089 million, up from $4,498 million on Dec 31, 2022.
Reiterated 2023 Outlook
For the full-year 2023, Cummins expects revenues to grow in the range of 15-20% year over year, the same as the prior projection.
EBITDA is forecast to be in the range of 15-15.7% of sales, the same as the previous forecast.
Cummins continues to stick to its plan of returning nearly 50% of its operating cash flow to shareholders in the form of dividends and share repurchases.
Zacks Rank & Key Picks
Cummins currently carries a Zacks Rank #3 (Hold).
Some top-ranked players in the auto space include Toyota Motor Corporation (TM - Free Report) and PACCAR Inc. (PCAR - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for TM’s 2023 sales and earnings implies year-over-year growth of 10.9% and 61.7%, respectively. The EPS estimate for 2023 has moved north by 21 cents in the past seven days. The 2024 EPS estimate has moved up by 20 cents in the past seven days.
The Zacks Consensus Estimate for PCAR’s 2023 sales and earnings implies year-over-year growth of 19.6% and 40.1%, respectively. The EPS estimate for 2023 has moved up by 17 cents in the past seven days. The 2024 EPS estimate has moved north by 11 cents in the past seven days.