Cummins(CMI) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Company revenues for Q1 2024 were $8.4 billion, a decrease of 1% compared to Q1 2023 [34][169] - EBITDA for the quarter was$ 2.6 billion, representing 30.6% of revenues, compared to $1.4 billion or 16.1% a year ago [34] - Net earnings for the quarter were$ 2 billion or $14.03 per diluted share, including a net gain related to the separation of Atmus of$ 1.3 billion [23] Business Line Data and Key Metrics Changes - Engine segment revenues were $2.9 billion, a decrease of 2% from a year ago, with EBITDA at 14.1%, down from 15.3% [136] - Power Systems segment revenues increased by 3% to$ 1.4 billion, with EBITDA rising from 16.3% to 17.1% of sales [43] - Accelera revenues increased by 9% to $93 million, driven by increased electrolyzer installations, but EBITDA loss was$ 101 million compared to a loss of $94 million a year ago [25] Market Data and Key Metrics Changes - In North America, medium-duty truck market guidance remains at 140,000 to 150,000 units, down 5% to flat from 2023 [37] - In India, total revenue is projected to increase by 9% in 2024, driven by strong power generation and on-highway demand [19] - In China, total revenue is expected to increase by 3% in 2024, with heavy- and medium-duty truck demand projected to range from down 5% to up 10% [135] Company Strategy and Development Direction - The company is focused on reducing costs, optimizing business operations, and investing in new technologies for future growth [2] - The introduction of the Cummins HELM platform aims to enhance efficiency and lower emissions, aligning with energy transition goals [15] - The company is raising its guidance for global power generation markets to be up 10% to 15%, driven by strong demand in data centers [38] Management's Comments on Operating Environment and Future Outlook - Management expects moderation in key markets in the second half of 2024 but has raised expectations for performance relative to prior guidance [26] - The company anticipates a decline in heavy-duty truck production in the third quarter, reflecting broader industry trends [150] - Management remains confident in the business's improvements and expects to convert revenue growth into higher earnings [61] Other Important Information - The separation of Atmus resulted in a reduction of common shares outstanding by 5.6 million [185] - The effective tax rate for Q1 was 8.7%, mainly due to the tax-free gain on the Atmus separation [23] - The company returned$ 239 million to shareholders in the form of dividends, consistent with its long-term plan [39] Q&A Session Summary Question: What is the position in the data center market? - Management highlighted strong demand from data center customers and noted that they are sold out on their 95-liter engines through 2025 [56] Question: Can you discuss the cadence of earnings over the year? - Management indicated that the quarter came in line with expectations and that they are seeing improvements in performance, which supports the raised guidance [50][149] Question: What are the expectations for the upcoming Analyst Day? - Management confirmed that they will discuss overall strategy, revenue, and margin expectations during the Analyst Day [29] Question: How is the company positioned for the 2027 EPA regulations? - Management expressed confidence in their ability to meet upcoming regulations and highlighted investments in new fuel-agnostic engine platforms [144][158] Question: What is the outlook for the heavy-duty truck market? - Management noted that while there is strength in the heavy-duty market, they anticipate some softening in the second half of the year [118][150]