Cummins beats Q2 estimates as Rumsey takes over as CEO

Cummins Inc. reported strong second-quarter earnings in North America while one-time charges and COVID lockdowns in China acted as a counterweight.

The leading manufacturer of engines and power distribution equipment reported Q2 net income of $702 million compared to $600 million in the same quarter of  2021. Earnings per diluted share were $4.94 compared to $4.10 a year ago.

Second-quarter revenues of $6.6 billion increased 8% from the same quarter in 2021. For the full year, Cummins stuck to its projection of an 8% increase in revenue.

One-time charges

Cummins (NYSE: CMI) took a $29 million, or 16 cents-per-share, charge related to the separation of its filtration business. The company also took a $48 million, or 34 cents-a-share, hit for losses on investments related to benefit plans.

Reserves related to the indefinite suspension of its Russia business partially offset those charges. The adjustment added $47 million or 33 cents a share to the bottom line.

Off-highway revenues in the engine business unit fell 8% because of a slowdown in China construction linked to COVID lockdowns. The components business also took a hit in addition to a tough comparison with year-ago results in China, whose economy recovered faster from initial covid infections than the rest of the world.

Strong EBITDA

Earnings of $1.1 billion before interest, taxes, depreciation and amortization amounted to 16% of sales. That compared to $974 million or 15.9% a year ago.

Cummins maintained full-year guidance of 15.5% EBITDA. But that does not count further expenses from Russia or the filtration business separation. The $3.7 billion acquisition of axle and chassis suppler Meritor Inc. also could add expense in future quarters. That Meritor (NYSE: MTOR) deal is expected to close this week.

“High inflation and rising global interest rates have increased uncertainty about the pace of growth in the global economy,” said Jennifer Rumsey, who became Cummins’ seventh CEO in its 103-year history on Monday. “We continue to monitor economic conditions closely and will adjust our operating plans should the outlook for our core markets weaken.”

Busy quarter of collaboration

Cummins, which regularly forms collaborations, accelerated the pace during Q2, including working with:

• Daimler Truck North America and Sweden’s Scania to deliver fuel cell electric powertrains for heavy-duty truck applications.
• Japan-based construction equipment maker Komatsu on the development of zero-emissions haulage equipment, including hydrogen fuel cell solutions for large mining haul truck applications.
• Chevron and Walmart to integrate the Cummins X15N natural gas engine, powered by renewable natural gas, into Walmart’s heavy-duty truck fleet.
• Startup hybrid powertrain maker Hyliion Holdings to certify Cummins’ X12N natural gas engine for use in the Hypertruck ERX.

Related articles:

Cummins names Rumsey to succeed Linebarger as CEO

Daimler and Cummins team up on fuel cell trucks

Cummins will buy Meritor for $3.7B

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