• Webinars
  • Magazine
  • Newsletter Subscription
    • Photo by Cummins Inc.
    Cummins Logo Signage Social 19 636eb4d302e93
    1. News & Analysis
    2. Wall Street Beat

    Cummins Revenue Jumps 11 Percent in Third Quarter not Including Acquisition

    Nov. 11, 2022
    Sales in North America increased 19 percent and international revenues decreased 1 percent compared to the same quarter in 2021 as strong demand across all global markets was offset by a market slowdown in China.
    Related To: Cummins Inc.

             Cummins Inc. posted third quarter revenues of $7.3 billion. Excluding the contribution of the Meritor Inc. business, the acquisition of which was completed on August 3, third quarter revenues were $6.6 billion, representing an increase of 11 percent from the same quarter in 2021.

    Sales in North America increased 19 percent and international revenues decreased 1 percent compared to the same quarter in 2021 as strong demand across all global markets was offset by a market slowdown in China, as well as Russia, where operations have been suspended indefinitely.  

    “During the third quarter of 2022, Cummins advanced its growth strategy most notably with the completion of the acquisition of Meritor, and we have been excited to welcome our new colleagues into our company,” said president and CEO Jennifer Rumsey. “Demand from customers remains strong, reflecting the quality and performance of our products and robust conditions in most markets except China. EBITDA for the third quarter improved year-over-year but declined compared to the second quarter of 2022, reflecting weaker joint venture earnings in China, a one-time bonus to employees to recognize their relentless commitment to meeting customer demand in challenging conditions, and costs associated with both the Meritor acquisition and the planned separation of our Filtration business. We expect results for Meritor and Cummins in total to improve in the fourth quarter.”   

    Net income attributable to Cummins in the third quarter was $400 million, or $2.82 per diluted share. Excluding the Meritor business and related acquisition and integration costs, net income in the third quarter was $456 million, or $3.21 per diluted share, compared to $534 million, or $3.69 per diluted share, in 2021.

    Earnings before interest, taxes, depreciation and amortization (EBITDA) in the third quarter was $884 million, or 12.1 percent of sales. Excluding the Meritor business and related acquisition and integration costs, EBITDA was $907 million, or 13.8 percent of sales, compared to $862 million, or 14.4 percent of sales, a year ago.

    The third quarter results for the company included two months of operations following the acquisition of Meritor. Meritor results within the third quarter include $737 million in revenue, EBITDA of $2 million and GAAP net loss of $37 million. Results of Meritor include an inventory valuation adjustment as required by purchase accounting, which resulted in a negative impact of $32 million. Third quarter results also include $25 million, or $0.13 per diluted share, of acquisition related costs, which consist of consulting and banker fees, and employee separation and retention payments. EBITDA for Meritor operations, excluding the purchase accounting and acquisition and integration costs, was $54 million in the third quarter, or 7.3 percent of sales.

     Third quarter 2022 highlights: 

    • On August 3, Cummins completed the acquisition of Meritor Inc., a leading global supplier of drivetrain, mobility, braking, aftermarket and electric powertrain solutions for commercial vehicle and industrial markets. The integration of Meritor’s people, products and capabilities in axle and brake technology will position Cummins as a leading provider of integrated powertrain solutions across internal combustion and electric power applications. The acquisition of Meritor is expected to generate annual pre-tax run-rate synergies of approximately $130 million by year three after closing, anticipated to be comprised of, among other things, SG&A savings, supply chain operations and facilities optimization. 
    • The company announced several collaborations that further enable our customers to achieve their decarbonization goals. During the third quarter, Cummins announced collaborations with Werner Enterprises, Transport Enterprise Leasing and Versatile to deliver 15-liter hydrogen internal combustion engines. The X15H hydrogen engine, part of Cummins’ fuel agnostic platform, will enable a more-timely solution to reduce carbon emissions by providing customers with an option that has powertrain installation commonality and end user familiarity. 
    • The New Power business continued to expand its green hydrogen presence globally. Cummins announced it will expand PEM electrolyzer manufacturing capacity at its Oevel, Belgium, factory to 1 gigawatt (GW). The company also announced it will begin producing electrolyzers in the United States, underscoring the company’s continued dedication to advancing the nation’s green hydrogen economy. Electrolyzer production will take place in Fridley, Minn.
    • Cummins published its 19th annual Sustainability Progress Report, including the company’s first update on progress on Cummins’ 2030 environmental goals aligned to its Planet 2050 environmental strategy. 
    • Progress continues to be made on the planned separation of the Filtration business. 
    • The company increased its quarterly dividend from $1.45 to $1.57 per share. Cummins has paid higher annual dividends to shareholders for 13 consecutive years.

    Third quarter 2022 detail (all comparisons to same period in 2021):

    Engine Segment 

    • Sales - $2.8 billion, up 8 percent 
    • Segment EBITDA - $363 million, or 13.1 percent of sales, compared to $391 million or 15.2 percent of sales
    • On-highway revenues increased 10 percent driven by strong demand in the North American truck market, pricing actions and strong aftermarket demand. Off-highway revenues decreased 3 percent driven by a slowdown in China construction. 
    • Sales increased 14 percent in North America and decreased 8 percent in international markets due to a decline in China demand and the indefinite suspension of operations in Russia. 

     Distribution Segment 

    • Sales - $2.2 billion, up 14 percent 
    • Segment EBITDA - $225 million, or 10.0 percent of sales, compared to $192 million, or 9.8 percent of sales
    • Revenues in North America increased 22 percent and international sales increased by 1 percent. 
    • Higher revenues were primarily driven by increased demand for parts and service. 

     Components Segment 

    • Sales - $2.7 billion; excluding Meritor, $2.0 billion, up 10 percent 
    • Segment EBITDA - $297 million, or 11.0 percent of sales; excluding Meritor and costs for the Filtration separation, $320 million or 16.2 percent of sales compared to $253 million, or 14.1 percent of sales 
    • Excluding Meritor, revenues in North America increased by 19 percent and international sales decreased by 1 percent due to lower demand in China.

    Power Systems Segment 

    • Sales - $1.3 billion, up 16 percent
    • Segment EBITDA - $193 million, or 14.3 percent of sales, compared to $134 million, or 11.5 percent of sales
    • Power generation revenues increased 11 percent driven by pricing actions and increased global demand. Industrial revenues increased 17 percent due to strong demand for aftermarket products and increased demand in oil and gas markets. 

     New Power Segment 

    • Sales - $50 million; excluding Meritor, $45 million, up 96 percent 
    • Segment EBITDA loss - $96 million; excluding Meritor operating results, $86 million 
    • Revenues increased due to higher battery demand in the North American school bus market in addition to the shipments of fuel cell systems to the bus market in China.
    • Costs associated with the development of fuel cells and electrolyzers, as well as products to support battery electric vehicles are contributing to EBITDA losses. 
    About the Author

    Michael Roth | Editor

    Michael Roth has covered the equipment rental industry full time for RER since 1989 and has served as the magazine’s editor in chief since 1994. He has nearly 30 years experience as a professional journalist. Roth has visited hundreds of rental centers and industry manufacturers, written hundreds of feature stories for RER and thousands of news stories for the magazine and its electronic newsletter RER Reports. Roth has interviewed leading executives for most of the industry’s largest rental companies and manufacturers as well as hundreds of smaller independent companies. He has visited with and reported on rental companies and manufacturers in Europe, Central America and Asia as well as Mexico, Canada and the United States. Roth was co-founder of RER Reports, the industry’s first weekly newsletter, which began as a fax newsletter in 1996, and later became an online newsletter. Roth has spoken at conventions sponsored by the American Rental Association, Associated Equipment Distributors, California Rental Association and other industry events and has spoken before industry groups in several countries. He lives and works in Los Angeles when he’s not traveling to cover industry events.