Cummins Inc. recorded a massive one-time gain from the split-off of its filtration business. But first-quarter revenue dropped as weakening business conditions impacted the engine maker and power distribution giant.
The Tier 1 supplier of truck engines and power systems for data centers and other businesses reported Q1 revenue of $8.4 billion. That was down 1% from a year ago. The number missed analyst estimates by $50 million. Sales in North America were flat. International revenues fell 1% due to lower demand in China and Europe.
Net income of $2 billion, or $14.03 per diluted share, included a net gain of $1.3 billion, or $9.08, from separating Atmus Filtration Technologies Inc. That compared to $790 million, or $5.55, in Q1 2023.
Atmus, which makes engine filters and specialty materials, was no longer seen as a strategic fit within Cummins. In standing up Atmus, Cummins positioned itself for a tax-free share swap of equity. Cummins effectively repurchased 5.6 million shares while disposing of the 80% of Atmus it owned after an initial public offer last year. The former division is based in Nashville, Tennessee.
“Cummins will continue its focus on advancing innovative power solutions, while Atmus is now well-positioned to pursue its own plans for profitable growth,” CEO and Chair Jennifer Rumsey told analysts.
Cummins is heavily investing in future powertrain technologies. That includes fully integrated electric systems, partly made possible by its acquisition of Meritor Inc. in August 2022. Accelera by Cummins, the rebrand of its New Power division, continues to see higher sales — up 9% in Q1 — but still books EBITDA losses — $101 million in the quarter.
Cummins reiterates lower revenue projection
Columbus, Indiana-based Cummins maintained an earlier projection that full-year revenues would fall 2% to 5%. But it noted the earlier projection included a full year of Atmus revenues. Those sales now will be part of the stand-alone company.
The company raised its full-year estimate for earnings before interest, taxes, depreciation and amortization to 14.5% to 15.5%, an increase of 10 basis points from previous guidance of 14.4% to 15.4% which also included Atmus results for the full year.
Class 8 orders under pressure with pent-up demand met
While No. 2 share leader Paccar Inc. on Tuesday lowered its industry estimate for full-year North America Class 8 orders to a midpoint of 270,000, Cummins raised its estimate to 255,000 to 275,000 units from 245,000 to 265,000 units. Its midpoint of 265,000 units suggests a greater slowdown after most pent-up demand from the pandemic has been met.
“We do still expect slowing demand in some of our key markets in the second half of the year,” Rumsey said in a statement.
Q1 industry production of heavy-duty trucks was 73,000 units, down 5% from 2023 levels. Cummins’ heavy-duty unit sales were 26,000 down 7% from 2023.
Industry production of medium-duty trucks was 41,000 units in Q1 increased 8%. Cummins’ engine sales of 36,000 were up 22% from 2023. The company maintained its prior guidance of 140,000 to 150,000 units, down 5% to flat from 2023,
Those lower volumes were reflected in EBITDA of $1.3 billion or 15.5% of sales for the quarter. That compared to $1.4 billion or 16.3% of sales a year ago, CFO Mark Smith told analysts.
Sales in the engines and components divisions fell by 2% and 6%, respectively. Revenues rose 5%, 3% and 9%, respectively, in the power distribution, power systems and Accelera divisions. With the separation of Atmus, formerly part of the components division, Cummins expects full-year components revenues to decrease 9% to 14% with EBITDA margins in the range of 13.5% to 14.5%.
Mixed divisional results
Sales strength in power systems for data centers — plus introduction of four new 50- and 78-liter generator set variants — should result in 10%-15% higher sales for the Power Generation business, Rumsey said. Cummins has “concrete plans” to increase production of its 95-liter generator, which she said is sold out through 2025. The company previously pegged power systems growth at 5%-10% for the year.
Editor’s note: Updates with comments and information from analyst call
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