Truck engine maker Cummins Inc. on Tuesday reported first-quarter revenue that topped analysts’ expectations, boosted by strong global demand for its products.

Revenue for the first quarter was $8.5 billion, a record 32% increase compared to the first quarter of 2022, the company said.

The company reported first-quarter net income of $790 million, or $5.55 per share, compared with $418 million, or $2.92 per share, during the same year-ago period.

Wall Street expectations for the quarter called for earnings of $4.81 per share and revenue of about $8 billion.

“Demand for our products continues to be strong across all of our key markets and regions, with a slow improvement in China,” Chief Executive Officer Jennifer Rumsey said during a call with analysts Tuesday. “We are delivering cycle-over-cycle improvement in financial performance despite persistent supply chain constraints.”

Columbus, Indiana-based Cummins (NYSE: CMI) is a manufacturer of diesel, electric and hybrid powertrains as well as powertrain-related components. The company’s markets include heavy- and medium-duty trucks, pickup trucks and industrial equipment.

Rumsey said the strong quarterly performance also came from its Meritor business, which supplies drivetrain, braking and electric powertrain products for commercial vehicles and industrial markets. Cummins acquired Meritor last year.

“Driven by the addition of Meritor, strong demand and improved pricing, EBITDA (earnings before interest, taxes, depreciation and amortization) was a record $1.4 billion or 16.1% in the first quarter, compared to $755 million or 11.8% a year ago,” Rumsey said.

Cummins sold $1.1 billion worth of heavy-duty truck engines in the first quarter, a 23% year-over-year (y/y) increase compared to 2022.

Sales of engines increased 9% y/y in the first quarter in North America and grew 8% y/y in international markets due to increases in China and India.

2023 outlook

Based on its current forecast, Cummins is raising its full-year 2023 revenue guidance to up 15%-20%, an increase from its prior projections of up 12%-17% due to stronger demand across most global markets. EBITDA is expected to be in the range of 15%-15.7%, an increase from the prior range of 14.5% and 15.2%.

“This reflects an improved outlook in North America, including stronger demand for Meritor,” Rumsey said. 

Supply chain issues led to slower production of new commercial trucks, forcing more companies and truckers to keep older fleets on the road for longer, which in turn increased the demand for aftermarket parts and services, Cummins officials said.

“We are forecasting higher demand in the heavy-duty truck and power systems markets and expect aftermarket revenues to increase compared with 2022,” Rumsey said. “While supply chain constraints continue to limit our industry’s collective ability to produce them, customer demand remains strong.”

Cummins is increasing its forecast for heavy-duty Class 8 truck engines in North America to be 270,000 to 290,000 units in 2023, compared with the company’s prior guidance of 260,000 to 280,000 units.

In March, the company announced the launch of Accelera by Cummins, a power business unit that aims to provide zero-emissions solutions for various industries.

“In 2023, we anticipate Accelera revenues to increase to the range of $350 million to $400 million and net losses to be in the range of $390 million at the midpoint, entirely consistent with our projections from three months ago,” Cummins Chief Financial Officer Mark Smith said during the call.

Smith also said that the company will be required to pay a yet unknown amount in civil penalties to resolve an ongoing issue with the Environmental Protection Agency and the California Air Resources Board. Cummins has been in discussions with the agencies over its emission systems for the pickup trucks market. 

“We understand that these agencies are likely to propose resolving this matter by requesting in the relatively near future that we agree to one or more consent decrees and pay certain civil penalties,” Smith said. “We are not able to estimate the amount of these penalties today but we anticipate that the amount is likely to be immaterial.”

CumminsQ1/23Q1/22Y/Y % ChangeTotal revenue$8.5B$6.3B32%Gross margin of sales24%24.9%(3.6%)EBIDTA$1.4B$930M50%Net income of sales9.5%9.1%4.4%Sales of Class 8 truck engines$1.1B$908M35%EPS$5.55$2.9290%›Cummins key performance operators. Revenue and operating income in millions.

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