Cummins Lifts 2024 Profit Outlook After Q3 Beat

Cummins Inc CMI shares surged after the company reported better-than-expected third-quarter 2024 results and reaffirmed its 2024 revenue guidance.

CMI reported third-quarter sales grew slightly by 0.30% year over year to $8.546 billion, beating the consensus of $8.294 billion.

The Columbus, Indiana-based company stated that sales in North America decreased by 1% year over year, and international revenues increased by 2%.

EPS for the quarter stood at $5.86 compared to $4.59 a year ago, beating the consensus of $4.78.

Sales by segments:

• Components $2.7 billion (-16% YoY)
• Engine $2.9 billion (-1% YoY)
• Distribution $3.0 billion (+16% YoY)
• Power Systems $1.7 billion (+17% YoY)
• Accelera $110 million (+7% YoY).

Gross profit increased 4.8% year over year to $2.171 billion, and the margin expanded slightly by 111 bps to 25.7%.

CMI reported an operating income of $1.05 billion (+10.5% YoY), and the margin expanded by 115 bps to 12.4%.

Cummins' operating cash for the quarter totaled $640 million, compared to $1.53 billion a year ago. As of September end, CMI held cash and equivalents of $1.733 billion.

Q3 EBITDA rose to $1.4 billion (16.4% of sales) from $1.2 billion (14.6%) last year, including Atmus separation costs.

"We achieved strong sales and profitability in the third quarter, led by improvement in our Power Systems and Distribution businesses, and have adjusted our full year projection for EBITDA percentage to be at the top end of the prior range. We continue to advance our Destination Zero strategy as we deliver innovative technologies for our customers, strengthen our position in key markets and drive improvement in our financial performance," said Jennifer Rumsey, chair and CEO of Cummins.

Rumsey stated that Cummins raised its profitability expectations for 2024 to the top end of its previous range, driven by continued improvements in the Power Systems and Distribution segments.

Despite facing slowing demand in the North American heavy-duty truck market in Q3, a trend expected to continue in Q4, Cummins remains well-positioned for strong financial performance, future growth investments, and shareholder returns.

2024 Outlook reaffirmed: Cummins continues to expect Revenue to be down 3% to flat. EBITDA is expected to be 15.5%, at the top end of the previous guidance of 15.0% to 15.5%.

The company aims to sustain strong cash flow, targeting 50% returns to shareholders while focusing on growth, dividends, and debt reduction.

Price Action: CMI shares are trading higher by 8.8% at $353.86 at the last check Tuesday.

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Image created using artificial intelligence via Midjourney.