An exterior view of Cummins Columbus Engine Plant in Columbus, Ind., Friday, Oct. 7, 2022. The Republic file photo
Cummins Inc. reported record revenue during the second quarter of the year, with the company raising its revenue forecast for the year due to what officials described as stronger-than-expected demand across several markets.
The Columbus-based company on Thursday reported $8.8 billion in revenue during the April-June period, up 2% compared to the second quarter last year. Sales in North America rose 4% while international revenues fell 2%.
On a per share basis, Cummins reported net income of $5.26 during the second quarter, up from $5.05 a year ago, though the 2023 figure included costs of $0.30 per share related to the separation of the company’s filtration business, now a standalone company called Atmus Filtration Technologies Inc.
Cummins’ second-quarter revenue this year topped Wall Street expectations of around $8.32 billion and earnings per share expectations of $4.83. Cummins shares rose sharply after the company reported its second-quarter results, at one point reaching a record trading price of $322.69.
“Demand for our products remains strong among many of our key markets and regions, resulting in record revenues in the second quarter of 2024,” Cummins Chair and CEO Jennifer Rumsey told analysts during an earnings call on Thursday.
Segment performances
Components: Sales of $3 billion in the second quarter represented a decrease of 13% compared to the same period in 2023, the company said. Revenues in North America decreased 10%, and international sales decreased by 17% primarily due to the separation of Cummins’ filtration business, now a standalone company called Atmus Filtration Technologies Inc., and lower demand in China and Europe.
Engine: Sales of $3.2 billion were up 5% compared to the same quarter last year. Revenues increased 7% in North America and increased 2% in international markets due to strong demand in the North American medium-duty truck market and pricing actions.
Distribution: Sales of $2.8 billion represented a 9% increase compared to the second quarter of 2023. Revenues in North America increased 6% and international sales rose 16% driven by increased demand for power generation products and pricing actions.
Power systems: Sales of $1.6 billion rose 9% compared to the same period in 2023. Power generation revenues jumped 16% driven by increased global demand, particularly for the data center market. Industrial revenues rose 2% primarily due to strong mining demand more than offsetting weaker demand in oil and gas markets.
Accelera: Sales of $111 million were up 31% compared to the second quarter 2023. Costs associated with the development of electric powertrains, fuel cells and electrolyzers, as well as products to support battery electric vehicles, contributed to the losses in the segment’s earnings before interest, taxes, depreciation and amortization (EBITDA), a measure of overall financial performance.
2024 outlook
Cummins said it is raising revenue forecast for 2024 due to stronger than expected demand across several markets, especially in North America on-highway and power generation markets.
Overall, the company is projecting that its revenues will be down 3% to flat this year compared to last year. Previously, company officials had said they were expecting revenues this year to be down 2% to 5% compared to 2023.
“We have raised our expectations for 2024 while still anticipating the second half to be weaker than the first half, primarily in the North America heavy-duty truck market,” Rumsey said. “…We now expect higher revenue in our engine, power systems and distribution segments, offsetting slightly lower revenue expectations for the Accelera business.”
Analysts react
Local analysts agreed that Cummins’ second-quarter performance was strong, highlighting the company’s power generation revenues.
Cummins reported that its power generation revenues jumped 16% in the second quarter compared to the same quarter last year driven in large part by increased global demand in the data center market.
Roger Lee, director of research at Columbus-based Kirr, Marbach and Co., said the company’s power generation results were one thing that stood out to him, especially demand in the data center market, which he said is largely being driven by artificial intelligence.
“You’re hearing about all these data centers being built for AI,” Lee said. “…With all these data centers, (tech companies) need to buy power systems from companies like Cummins. …If you think about the future of our economy in a few years, everyone is betting on AI. Everyone is betting on data centers to support AI.”
“Everyone thinks trucks (when they think of Cummins), but now it’s trucks plus data centers because of AI,” Lee added. “…At the end of the day, you can’t have data centers without reliable power, and Cummins is synomous with reliable power.”
Craig Kessler, president and chief investment officer at Columbus-based Kessler Investment Group., also highlighted Cummins’ power generation results in the second quarter.
“I think power gen is going to be a big story for them going forward, and that’s kind of their AI connection,” Kessler said. “Providing power solutions is going to be a growing part of their business as a result of that. …I think they’re well positioned across the board, but power gen in particular stands out.”
Kessler said it also bodes well for Cummins that the company has risen its outlook for the year given the political uncertainty with the upcoming U.S. presidential election and a number of geopolitical issues and other challenges that the world economy is expected to face in the back half of the year.
“We’ve got an election coming up,” Kessler said. “We’ve got all kinds of geopolitical issues going on around the world. We have some unemployment numbers that are starting to tick a little bit higher, suggesting that the economy is starting to downshift. …To be able to raise (revenue guidance) in a second half of the year with a fair number of question marks hanging over it … I think it bodes well for Cummins going into the rest of the year.”
By Andy East — The (Columbus) Republic is a sister newspaper to the Daily Journal.
