- Revenue: $8.8 billion, up 2% year-over-year.
- EBITDA: $1.35 billion or 15.3% of sales, compared to $1.3 billion or 15.1% a year ago.
- North America Revenue: $5.5 billion, up 4% year-over-year.
- International Revenue: $1.6 billion, down 2% year-over-year.
- Heavy-Duty Truck Production: 75,000 units, up 1% year-over-year.
- Heavy-Duty Unit Sales: 31,000 units, up 7% year-over-year.
- Medium-Duty Truck Production: 41,000 units, up 4% year-over-year.
- Medium-Duty Unit Sales: 38,000 units, up 13% year-over-year.
- Stellantis Engine Shipments: 41,000 units, up 8% year-over-year.
- Power Generation Revenue (North America): Up 23% year-over-year.
- China Revenue: $1.6 billion, down 2% year-over-year.
- India Revenue: $649 million, down 10% year-over-year.
- Gross Margin: $2.19 billion or 24.9% of sales, flat year-over-year.
- Selling, Admin and Research Expenses: $1.21 billion or 13.7% of sales, down from $1.26 billion or 14.6% last year.
- Joint Venture Income: $103 million, down $30 million year-over-year.
- Net Earnings: $726 million or $5.26 per diluted share, compared to $720 million or $5.05 per diluted share last year.
- Operating Cash Flow: Outflow of $851 million, compared to an inflow of $483 million last year.
- Components Segment Revenue: $3 billion, down 13% year-over-year.
- Engine Segment Revenue: $3.2 billion, up 5% year-over-year.
- Distribution Segment Revenue: $2.8 billion, up 9% year-over-year.
- Power Systems Segment Revenue: $1.6 billion, up 9% year-over-year.
- Accelera Revenue: $111 million, up 31% year-over-year.
- Dividend Increase: 8.3% from $1.68 to $1.82 per share.
- Shareholder Returns: $230 million in dividends.
Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cummins Inc (CMI, Financial) reported record revenues of $8.8 billion for Q2 2024, a 2% increase from the same period last year.
- The company announced a significant partnership with Isuzu Motors Limited, launching a new 6.7-liter engine for the Japan market and a battery electric powertrain for Isuzu's F-Series in North America.
- Cummins Inc (CMI) received a $75 million grant from the Department of Energy to convert manufacturing space for zero emissions components, the largest federal grant ever awarded solely to the company.
- The Power Systems segment achieved record sales and profitability, driven by a 23% increase in North American power generation revenues.
- The company raised its full-year revenue guidance to down 3% to flat, and its EBITDA guidance to 15% to 15.5%, reflecting improved outlooks in key markets.
Negative Points
- International revenues decreased by 2% compared to last year, with notable declines in China and India.
- The Accelera business segment saw a reduction in full-year sales expectations by $50 million due to slower-than-expected energy transition progress.
- Joint venture income decreased by $30 million from the prior year, primarily driven by lower technology fees and a weak domestic truck market in China.
- Operating cash flow was an outflow of $851 million, mainly due to a $1.9 billion payment required by previously disclosed settlement agreements.
- The company anticipates a softening in the North America heavy-duty truck market in the second half of the year, projecting a 10% decline in Q3 and 20% overall for the second half.
Q & A Highlights
Q: Just on the China truck, you didn't change your expectations there. Wondering how you're thinking about some of the new incentives that the government put in place there to support that second half of the year? Is that a potential point of conservatism in your outlook or do you think it may not materialize into anything there?
A: We've seen pretty consistent performance out of China and the economic conditions over the last 18 to 24 months. There's been previous indications of actions the government may take, none of which has really translated into any meaningful change in our industry. So really, we're seeing strong performance still with natural gas product and export and a relatively weak domestic diesel market. And I'm not anticipating that changing in the near term. (Jennifer Rumsey, CEO)
Q: The margins in power systems are quite remarkable on a pretty muted sales growth assumption for 2024. So if you could just help us understand what's going on there, sort of what's structural versus, you know, and do you see the opportunity for margins to improve from these levels in the out years, given you're already assuming a close to 18% margin this year?
A: On power systems, there's really three elements to the margins. The team has done a fantastic job starting with some people, cost reduction, reprioritizing where we're investing, strong pricing environment, and operational efficiency. Yes, we do expect there's still more to come. (Mark Smith, CFO)
Q: Can you just double-click on pricing for us a little bit? I mean, how much pricing are you seeing? And sort of how should we think about that for the rest of the year?
A: On average across the company, and it varies by segment, but 2.5% for the year. That really hasn't changed. It's been an important driver of the power systems results, and I don't think that's going to vary a lot. The year-over-year increase should mostly hold across all the quarters. (Mark Smith, CFO)
Q: Can you talk about how many more medium-duty engines you folks expect to ship globally at 2026 versus, I don't know, call it two or three years ago given the timing of the transition? And if you could just comment on Japan is tough place to import product into given the currency. Can you just talk about how you folks are able to do that and economically?
A: We're seeing growing medium-duty demand in the US with Daimler transitioning to us, and Isuzu as well as some other customers like Hino. We've now launched the medium-duty product in India with Daimler. On Isuzu business, we are building that new B6.7 in their Tohoku plant in Japan. So we're not importing that engine or building it in the market. We'll see some slow volume growth there in Japan and other Asia Pacific and global markets later this year. (Jennifer Rumsey, CEO)
Q: Can you talk about the components driving your margin improvement in the engine segment and help us kind of quantify what's ultimately driving that? And how are you thinking about kind of 2025 margin improvement?
A: We've got a little bit of help from improved parts outlook, and we've been taking some measured actions across the company since the second half of last year into the first quarter of this year, which should help with some lower costs in the second half of this year. And we've got a stronger outlook in medium-duty trucks. (Mark Smith, CFO)
Q: Can you make us more comfortable on the engine guide for the second half of the year?
A: On the engine business, what's helping mitigate the margins is really some of the cost reduction actions that we've taken during the year, slightly better outlook for parts, and some of the puts and takes on the revenue. Those are the reasons why the margins at those revenue levels we expect to hold up. (Mark Smith, CFO)
Q: Can you talk about the parts business and what's driving the demand?
A: It's somewhat demand-driven and also inventory destocking was a pretty big factor. There was a focused effort last year to reduce some of the inventory levels that had been carried because of the disruptions. Now you see it settling into what we see as a pretty steady and solid demand in both our on and off-highway market. (Jennifer Rumsey, CEO)
Q: Can you provide an update on the demand and the order books for the x15 and how is that looking for the back half tracking to expectations?
A: We are launching that product this month with PACCAR and next year with DTNA. We've got some early demand from some of the big fleet customers that have sustainability goals in the market. We've projected we could get up to about 8% in the market, but it will take some time for us to get up to that level. (Jennifer Rumsey, CEO)
Q: When do you believe we start to show positive comparisons potentially in North American engines? And how might the election impact your outlook for engines or new power?
A: It's difficult to predict exactly when we'll see improvement, but at some point next year, we'll see recovery. Regarding the election, we work across party lines to ensure that regulation and policy reflect the opportunities and challenges in our industry. Our destination zero strategy is about decarbonizing the industry over time, and we will continue to advocate for that. (Jennifer Rumsey, CEO)
Q: Can you dive a little bit deeper into the power systems and really focus on the unit outlook and how to think about capacity for the remainder of the year?
A: There's a lot of variation in products and applications in power systems. We're working towards supporting the data center capacity, and there's some investment in capacity and reorganizing where we make product around the world. We feel confident about the revenue guide for this year and supporting revenue going into next year. (Mark Smith, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
