Cummins, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Jennifer Rumsey discussed 2024 strong financials, execution of Destination Zero strategy, new engine platforms (HELM), production of X15N natural gas engine, new generator sets, $200 million investment in power generation plants, and separation of Atmus Filtration.
• Mark Smith detailed Q4 and full-year financials, EBITDA margins, revenue components by segment, and provided 2025 segment projections.

Segment Performance

• Engine segment: 2024 revenues were a record $11.7 billion, EBITDA 14.1% of sales. 2025 projection: revenues down 2% to up 3%, EBITDA 14.2% to 15.2%.
• Components segment: 2024 revenues $11.7 billion, 13% lower than prior year, EBITDA 13.8% of sales. 2025 projection: revenues down 5% to flat, EBITDA 13.8% to 14.8%.
• Distribution segment: 2024 revenues increased 11% to a record $11.4 billion, EBITDA 12.1%. 2025 projection: revenues increase 2% to 7%, EBITDA 12% to 13%.
• Power Systems segment: 2024 revenues a record $6.4 billion, up 13% driven by power generation, EBITDA 18.4%. 2025 projection: revenues 2% to 7%, EBITDA 19% to 20%.
• Accelera segment: 2024 revenues $414 million, net operating loss $452 million. 2025 projection: revenues $400 million to $450 million, net losses $385 million to $415 million.

Guidance

• 2025 total company revenues forecast: down 2% to up 3% vs 2024.
• EBITDA forecast: 16.2% to 17.2% of sales, up from 15.7% in 2024.
• North America on-highway truck markets expected weaker first half, but power generation to remain strong.
• China revenue projection: increase 5%, heavy/medium-duty truck demand range down 5% to up 10%.
• India revenue projection: increase 10% driven by power generation.
• Global construction: flat to down 10%.
• Global power generation revenues: increase 5% to 15%.
• Aftermarket: revenue improvement flat to up 5%.
• Accelera 2025 sales: $400 million to $450 million.

Risks

• Forward-looking statements could differ due to risks and uncertainties, detailed in SEC filings, particularly in the Risk Factors section of the most recently filed Annual Report on Form 10-K and quarterly reports on Form 10-Q.

Question and Answer

Q: Angel Castillo from Morgan Stanley asked about power generation guide split between price and volume, and $200M investment in power gen.

A: Jennifer Rumsey talked about capacity ramp-up, strategic pricing, and $200M investment in plants.

Q: Follow-up on EPA27 and prebuy.

A: Jennifer Rumsey mentioned expecting EPA27 to stay, prebuy in second half.

Q: Stephen Volkmann from Jefferies asked about Accelera restructuring and HELM platform unit volumes.

A: Jennifer Rumsey discussed Accelera focus on battery electric, electrolyzers, fuel cells, and HELM platform fuel flexibility.

Q: Jerry Revich from Goldman Sachs asked about Power Systems revenue growth and China truck market.

A: Mark Smith and Jennifer Rumsey talked about revenue growth due to larger engine sales, and China truck market outlook.

Q: Tim Thein from Raymond James asked about Components margin outlook and Accelera EBITDA breakeven.

A: Mark Smith discussed Components cost reduction and Accelera loss reduction.

Q: Kyle Menges from Citi asked about R&D spend and parts outlook.

A: Mark Smith talked about R&D spend and parts outlook.

Q: Jamie Cook from Truist Securities asked about Power Systems margins and tariffs.

A: Mark Smith discussed Power Systems margin drivers and tariff strategy.

Q: David Raso from Evercore asked about D&A and Engine margins.

A: Mark Smith explained D&A allocation and Engine margin drivers.

Q: Avi Jaroslawicz from UBS asked about North America heavy-duty truck outlook and Engines sales guidance.

A: Mark Smith and Jennifer Rumsey discussed heavy-duty truck outlook and Engines sales.

Q: Rob Wertheimer from Melius Research asked about Power Systems data center profit and business improvement.

A: Jennifer Rumsey talked about data center market and Power Systems improvements.

Q: Tami Zakaria from JPMorgan asked about Distribution segment and prebuy lift.

A: Mark Smith discussed Distribution segment and prebuy lift.