Release Date: May 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cummins Inc (CMI, Financial) delivered strong results in the first quarter, led by record performance in the power systems segment.
• The company introduced the X10 engine, replacing the L9 and X12 platforms, offering improved performance, durability, and efficiency.
• Cummins Inc (CMI) announced the acquisition of First Mode's assets, enhancing its retrofit hybrid solutions for mining and rail operations.
• The company reported a 68% increase in sales of power generation equipment in China, driven by accelerating data center demand.
• Cummins Inc (CMI) achieved a gross margin improvement, driven by favorable pricing, higher aftermarket, and operational improvements.

Negative Points

• Revenues for the first quarter were $8.2 billion, a decrease of 3% compared to the first quarter of 2024.
• EBITDA was $1.5 billion or 17.9%, down from $2.6 billion or 30.6% a year ago, partly due to the absence of a one-time gain from the previous year.
• The company faces heightened uncertainty due to trade tariffs, impacting its ability to provide reliable forecasts for the year.
• North America truck market showed softening, with heavy-duty unit sales down 21% from 2024.
• International revenues decreased by 5% in the first quarter of 2025 compared to a year ago, with a notable decline in India.

Q & A Highlights

Q: Can you quantify the gross or net tariff cost and which segments are most impacted? Also, how are you handling pricing with the current backlog? A: Mark Smith, CFO: It's difficult to quantify due to the evolving nature of tariffs. The broader concern is the economic impact. We are taking steps to mitigate the impact and will pass on costs where necessary. Jennifer Rumsey, CEO: We have different markets with varying impacts. Power generation has a multi-year order board, and aftermarket business may benefit from delayed purchases. The engine and components markets are more sensitive, as seen with recent heavy-duty truck orders.

Q: Regarding power systems, should we consider the current margin performance as the run rate going forward? A: Mark Smith, CFO: There are no significant one-off items in the results, and the business has improved. Aftermarket sales were higher than expected, but the underlying performance is strong. We aim to maintain strong margins as demand trends continue.

Q: How does Cummins plan to respond if EPA 2027 regulations do not move forward? A: Jennifer Rumsey, CEO: We anticipate revisions in greenhouse gas regulations, but still expect NOx regulations in 2027. We are investing in new platforms to meet these regulations. If changes occur, we will revisit our product launches, but currently, we plan to proceed as scheduled.

Q: Can you discuss the impact of tariffs on your financial results and the timeline for this impact? A: Mark Smith, CFO: The impact of tariffs in Q1 was immaterial. We expect the impact to grow in the second half of the year, assuming tariffs remain. We will update on the financial impact as we progress, but the broader concern is the economic environment and demand levels.

Q: What actions are you taking to mitigate tariff impacts, and is there any tariff pass-through in your contracts? A: Jennifer Rumsey, CEO: We are using inventory strategies and dual sourcing to mitigate impacts. As we gain clarity on tariffs, we may adjust our strategies. We are working with suppliers and customers to manage these challenges.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.