Cummins

Cummins is a global manufacturer of diesel, gas, electric and hybrid engines.

They sell their products to Original Equipment Manufacturers (OEMs), distributors, dealers and other customers worldwide.

They serve their customers through a network of 500 wholly-owned, joint venture an independent distributors and more than 10,000 Cummins certified dealer locations in 190 countries and territories.

Employees: 60,000

Revenue: $28.1 Billion FY2022

HQ Location: Columbus, Indiana, US

What they do:

  • They manufacture engines and supporting components and service.

  • They have five operating segments:

    • Engine

    • Distribution

    • Components

    • Power Systems

    • New Power

  • Each segment shares technology, customers, strategic partners, brand recognition and dealer network.

Their vision and priorities:

Why we exist (Our Mission):

Making people’s lives better by powering a more prosperous world

What we want to accomplish (Our Vision):

Innovating for our customers to power their success

How we will do it (Our Values)

  • INTEGRITY - Doing what you say you will do and doing what is right

  • DIVERSITY AND INCLUSION - Valuing and including our differences in decision making is our competitive advantage

  • CARING - Demonstrating awareness and consideration for the wellbeing of others

  • EXCELLENCE - Always delivering superior results

  • TEAMWORK - Collaborating across teams, functions, businesses and borders to deliver the best work

Financial and Business Goals

  • FY2023 guidance:

    • Consolidated revenue up 12-17% on prior year

    • EBITDA margin 14.5%-15.2%

    • Capital expenditures $1.2bn to $1.3bn

Things to know right now

  • Backlog

    • As they adjust to the recovery from the COVID-19 pandemic and the rapid return of demand in many manufacturing industries, they are experiencing supply chain disruptions, incremental costs and related challenges throughout the supply chain.

  • Destination Zero and PLANET 2050

    • The company has declared visionary environmental aspirations out to 2050, with quantifiable goals for 2030, including reducing there Scope 1 and 2 emissions by 50% and reduce Scope 3 emissions from products in the field by 25%

  • Acquisition of Meritor Inc

    • In August 2022 Cummins completed the acquisition of Meritor, a leading supplier of drivetrain, mobility, braking, aftermarket and electric powertrain solutions.

    • Meritor supports Cummins’ shift towards advanced environmentally friendly power for their customers.

What does each business unit do?

Engine Segment

The Engine segment manufactures and markets a broad range of diesel and natural gas-powered engines under the Cummins brand name, as well as certain customer brand names, for the heavy and medium-duty truck, bus, recreational vehicle (RV), light-duty automotive, construction, mining, marine, rail, oil and gas, defense and agricultural markets.

The segment is organised by engine displacement size and serves these end-user markets:

  • Heavy-duty truck

  • Medium-duty truck and bus

  • Light-duty automotive (Pick-up and light commercial vehicle (LCV))

  • Off-highway

Distribution Segment

This is the company’s primary sales, service and support channel.

The segment serves our customers and certified dealers through a worldwide network of wholly-owned, joint venture and independent distribution locations.

The Distribution segment is organized and managed as eight geographic regions, including North America, Asia Pacific, Europe, Russia, China, Africa and Middle East, India and Latin America.

Components Segment

The Components segment supplies products which complement the Engine and Power Systems segments, including aftertreatment systems, turbochargers, transmissions, filtration products, electronics and fuel systems for commercial diesel and natural gas applications

The segment is organised around the following businesses:

  • Emission solutions

  • Turbo technologies

  • Filtration

  • Electronics and fuel systems

  • Automated transmissions

Power Systems Segment

The Power Systems Segment is organised around the following product lines:

  • Power generation - standby and prime power generators

  • Industrial - engines for use in mining, rail, defence, oil and gas and marine applications

  • Generator technologies - A/C generator/alternator products for internal consumption and for external generator set assemblies.

New Power Segment

The New Power Segment produces hydrogen production solutions as well as electrified power systems ranging from fully electric to hybrid.

The New Power segment is currently in the development phase with a primary focus on research and development activities for their power systems, components and subsystems.

Key Risks

  • Government regulation related to emission certification and compliance

  • Global trade laws and taxation rates could change

  • Supply chain issues and costs impact ability to deliver on orders

  • Challenge of aligning capacity with demand

  • Significant earnings come from joint ventures that Cummins doesn’t control

  • Quality control in delivered products

  • Separation of filtration business may not be completed on schedule

  • Significant competition in the regions they serve

Their Competitors

  • Weichai Power Co Ltd

  • Caterpillar Inc

  • Deutz AG

  • Robert Bosch GmbH

  • Parker-Hannifin

  • Rolls-Royce Power Systems

Their Financial Calendar

Q1: January-March - Earnings 3rd May 2022

Q2: April-June - Earnings 2nd August 2022

Q3: July-September - Earnings 3rd November 2022

Q4: October-December - Earnings 6th February 2023

Next Earnings Report:

Around 3rd May 2023

Positives from the Q4FY22 earnings report:

  • Fourth quarter revenues of $7.8bn ($6.6bn excluding Meritor business)

  • Revenues up from $5.85bn same period last year

  • Gross margin 26.3% up from 22.5% same period last year

  • Diluted Earnings Per Share $4.63 up from $2.73 same period last year

Challenges from the Q4FY22 earnings report:

  • International revenues were down 1% compared to 25% increase for North America

  • Strong demand across all global markets was offset by market slowdown in China and indefinite suspension of all operations in Russia.

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