Cummins Inc. earnings

Management highlights

• Major events in the quarter: Deployment of world's first commercial hybrid electric ultra-class mining truck in February; Mack Truck integrating Cummins X10 engine into Mack Granite chassis in March; sale of low pressure fuel cell business in Accelera segment. • First quarter sales $8.4 billion, up 3% y-o-y; EBITDA $1.3 billion, or 15.4%, with net charge of $199 million from fuel cell sale. Excluding charge, EBITDA $1.5 billion, or 17.7%. • North America power generation revenues up 23% driven by data center demand; international revenues up 16% y-o-y, China revenues $2.1 billion, up 19% y-o-y, India revenues $814 million, up 12% y-o-y. • Outlook for 2026: Raised total company revenues forecast to 8%-11% increase, North America heavy duty truck forecast 230,000-250,000 units, medium-duty truck forecast 125,000-135,000 units; China total revenue including joint ventures expected up 10%, India total revenue including joint ventures expected up 2%, global construction demand flat to up 10%, global power generation revenues expected up 15%-25%, aftermarket expected 2%-8% increase.

Guidance

• Raised total company revenues forecast for 2026 to 8%-11% increase from prior 3%-8%. • Raised North America heavy duty truck forecast to 230,000-250,000 units from 220,000-240,000 units. • Increased North America medium-duty truck forecast to 125,000-135,000 units from 110,000-120,000 units. • China total revenue including joint ventures expected up 10% in 2026, improved from prior down 1%. • India total revenue including joint ventures expected up 2% in 2026, up from prior 5% decline. • Global construction demand expected flat to up 10% y-o-y, improvement from prior down 10%-flat. • Global power generation revenues expected up 15%-25% from prior 10%-20%. • Aftermarket expected 2%-8% increase, consistent with prior outlook.

Segment performance

Engine segment: First quarter revenues $2.7 billion, down 4% y-o-y; EBITDA 10.4%, down from 16.5% y-o-y. Full-year 2026 engine business revenues expected up 7%-12%, EBITDA margin 12.5%-13.5%. Component segment: First quarter revenue $2.5 billion, down 5% y-o-y; EBITDA 13.3%, down from 14.3% y-o-y. Full-year 2026 component revenues expected up 5%-10%, EBITDA margin 13.5%-14.5%. Distribution segment: First quarter revenues increased 7% to $3.1 billion; EBITDA 14.2% of sales, up from 12.9% y-o-y. Full-year 2026 distribution revenues expected up 9%-14%, EBITDA margin 13.7%-14.7%. Power system segment: First quarter revenues $2 billion, up 19%; EBITDA record, 29.5% of sales. Full-year 2026 power systems revenues expected to grow 14%-19%, EBITDA margin 25%-26%. Accelera segment: First quarter revenues $101 million, down 2%; EBITDA loss $277 million, including $199 million net charge from fuel cell sale. 2026 Accelera revenues expected $300-$350 million, net losses excluding fuel cell sale charge expected $270-$300 million.

Risks & headwinds

• Tariff impacts: Net impact of tariffs to EBITDA expected to be immaterial for remainder of 2026 but still a risk. • EPA regulation uncertainties: Delayed launch of B series engine and potential implications on warranties, useful life, and market reactions. • Accelera segment risks: Continued need to manage losses and invest in products with uncertain adoption and future profitability. • Supply chain risks: Potential constraints in meeting build rates and supply ahead of EPA 27 regulatory changeover and impact on production and margins.

Analyst Q&A

• Q: Angel Castillo of Morgan Stanley asked about power systems one-time costs and margin cadence.

  A: Mark said to back normal seasonality, expect Q4 to be shorter production quarter, China demand weighted to first half, net tariff recoveries immaterial, and one-time cost recovery.

• Q: Kyle Menges of Citigroup asked about EPA 27 engines and B platform launch.

  A: Jennifer said anticipate fuel efficiency improvements, delayed B platform launch to January 28, continue to plan for X15, X10, and 27 launch.

• Q: Jerry Revich of Wells Fargo Securities asked about 95-liter engine lead times and engine EBITDA margin with EPA 27.

  A: Mark said 95-liter engine lead times, and expected positive story from Brett on engine performance improving over time as peak investment period rolls off.

• Q: Stephen Volkman of Jefferies asked about engine incrementals and warranty with new platforms.

  A: Mark said new platform launch starts with higher warranty accrual rates, but history shows improvement over time.

• Q: Stephen Fisher of UBS asked about heavy-duty truck market and tariff impact.

  A: Jennifer said first half improvement, second half build rates constrained by supply, and net tariff impact immaterial with supply chain benefits.

• Q: Tim Thine of Raymond James asked about B series engine launch and China profit dynamics.

  A: Jennifer said working with EPA on rule revision, and China power generation demand for data centers driving growth.

• Q: Rob Wertheimer of Milius Research asked about electrification demand in North America.

  A: Jennifer said demand for electric trucks in North America is low, focusing on global opportunities.

• Q: Tammy Zakaria of J.P. Morgan asked about price realization and Q2-Q3 bills.

  A: Mark said price-cost modest positive, Q2 expected better than Q1, Q3 strong with seasonality in Q4.

• Q: Cole Cousins of Wolf Research asked about engine pricing and EPA 27 penalties.

  A: Mark said no significant price decline per unit, mix variation, and working with EPA on fair rule to avoid noncompliance penalties.