Cummins posts record 2022 results as it integrates Meritor business

Cummins Inc. posted strong fourth-quarter results and it set records in several financial metrics in 2022 as the engine maker integrated billions of dollars of acquisitions including taking over Meritor Inc.

Revenue of $7.8 billion in the last three months of 2022 was 32.2% above Q4 of 2021. It topped analyst estimates by $590 million, according to investor site Seeking Alpha.

Not counting the Meritor business and related integration costs, net income for the quarter was $644 million, or $4.52 per diluted share (EPS), compared to $394 million, or $2.73, in 2021. The EPS fell in line with analysts’ projections.

Cummins melts in Meritor

Cummins had five months of Meritor results to report following the August closing of the acquisition. During the year, Cummins also purchased Jacobs Automotive Systems for $325 million. And it paid $197 million for the Siemens Commercial Vehicles business that Meritor initiated with its new parent’s blessing.

“The innovative talent, technology and capabilities these acquisitions bring will position Cummins for success as the industry decarbonizes,” President and CEO Jennifer Rumsey said in a news release.

Cummins moved most of Meritor’s business into its components business unit. Meritor’s electric e-axle business became part of Cummins’ New Power segment, which now offers a fully integrated electric powertrain.

Including Meritor, Cummins’ Q4 results added $1.2 billion in revenue and earnings before interest, taxes, depreciation and amortization of $60 million. The results included $27 million of integration costs. Excluding those costs, Meritor operations were $87 million or 7.5% of sales, just over half the EBITDA rate for all of Cummins.

Whole company EBITDA in 2022 was $3.8 billion, or 13.5% of sales. Leaving out Meritor-related expenses and $111 million of costs related to suspending its Russia operations and $81 million of costs for separating its Filtration business, EBITDA was $4 billion, or 15.1% of sales, compared to $3.5 billion, or 14.7%, a year ago.

2023 outlook for Cummins

Cummins projects full-year 2023 revenues to be up 12% to 17%. EBITDA should range from 4.5% to 15.2% of sales. That includes projected results of $4.5 billion to $4.7 billion for the Meritor business. It excludes any impact positive or negative for the separation of the Filtration business to run as a stand-alone entity.

The New Power segment is still expected to post a negative EBITDA in 2023 even as sales rise. New Power houses Cummins’ hydrogen electrolyzer, fuel cell and electrification technologies.

“In 2023, we anticipate that demand will remain strong in most of our key regions and markets, especially in the first half of the year,” Rumsey said. “We will continue monitoring global economic indicators closely and ensure we are prepared should economic momentum slow further.”

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