Cummins Q3 Earnings Call Highlights

Key Points

• Record profitability: Third-quarter revenue rose 13% to $9.4 billion, while EBITDA reached a record $1.8 billion and net earnings climbed to $1.1 billion.
• Weaker truck demand trimmed the outlook: Cummins now expects 2026 revenue growth of about 10%, the low end of its prior range, after cutting pickup-engine and medium-duty production forecasts.
• Data centers are fueling Power Systems growth: Segment revenue increased 15% to a record $2.3 billion, and strong orders—including larger generator sets extending into 2028—support the company’s growth outlook, despite supply constraints delaying some shipments.

Cummins NYSE: CMI reported record third-quarter profitability as demand for truck engines and data center power equipment lifted revenue, but the company narrowed its full-year sales outlook after pickup truck demand fell short of expectations.

Revenue rose 13% from a year earlier to $9.4 billion, while earnings before interest, taxes, depreciation and amortization, or EBITDA, climbed to a record $1.8 billion, or 18.9% of sales. A year earlier, EBITDA was $1.2 billion, or 14.3% of sales, including $240 million in goodwill impairment and inventory charges related to the Accelera business.

Excluding those prior-year charges, the EBITDA margin improved by approximately 170 basis points. CEO Jennifer Rumsey attributed the improvement primarily to higher volumes, partially offset by increased variable compensation expenses.

Net earnings rose to $1.1 billion, or $8.25 per diluted share, from $536 million, or $3.86 per share. The latest quarter included $75 million in favorable discrete tax items, equivalent to $0.54 per diluted share. Operating cash flow increased to $1.4 billion from $1.3 billion.

Outlook Reflects Weaker Pickup Demand

Cummins now expects 2026 revenue to grow approximately 10%, at the low end of its previous 10% to 13% range. It forecasts an EBITDA margin of approximately 18.2%, compared with its earlier range of 18% to 18.5%.

CFO Mark Smith said lower-than-expected North American pickup truck volumes were the primary reason for the revenue revision. The company cut its full-year pickup engine shipment forecast to 118,000 to 122,000 units from 125,000 to 140,000, citing pressure from elevated diesel prices and interest rates.

Cummins also lowered its North American medium-duty truck production forecast to 125,000 to 130,000 units from 130,000 to 140,000. Rumsey said regulatory uncertainty and the anticipated phased transition to EPA 2027 products had delayed some customer purchasing decisions. The company maintained its heavy-duty truck market forecast at 240,000 to 250,000 units.

Smith said the updated full-year outlook implies fourth-quarter revenue growth of 15% year over year. He added that third-quarter revenue fell short of the company’s expectations partly because of supply constraints and partly because of market conditions, primarily weaker pickup demand.

Data Center Demand Drives Power Systems Growth

Power Systems revenue rose 15% to a record $2.3 billion, and its EBITDA margin increased to 25.4% from 22.9%. Smith cited stronger global power generation demand and favorable pricing. Cummins maintained its forecast for global power generation revenue growth of 15% to 25% in 2026.

Supply constraints limited third-quarter shipments across Power Systems and Distribution. Smith said a Power Systems supplier challenge delayed production and subsequent installations, shifting approximately $200 million in expected revenue from the third quarter into the fourth. Cummins expects to recover most delayed shipments in the final quarter.

Rumsey said third-quarter order intake exceeded expectations, with orders for larger generator sets extending into the second half of 2028. Smith said data center order dollars had reached roughly equal levels in the U.S. and international markets, with China and Southeast Asia among the fastest-growing areas.

Cummins said it remains on track with its power generation capacity expansion. Rumsey expects an increase in capacity next year, with most of the additional capacity coming online in 2028. The company also opened an approximately $100 million cooling systems facility in Wisconsin that she said will more than double production capacity for its IEA business.

In August, Cummins announced its selection to supply battery energy storage systems for a large U.S. data center project. Smith said the opportunity was likely to grow but was not expected to be the most significant factor in the company’s Power Systems outlook.

Product Transition and Electrolyzer Review

Rumsey said Cummins expects the Environmental Protection Agency’s final rule to be issued likely in December and anticipates that nonconformance penalties, or NCPs, will be included. She said uncertainty over their amount was contributing to hesitation among customers. Cummins plans to pass applicable penalties on to customers, Smith said.

The company plans limited production of its new X10 and X15 engines beginning in January, followed by a transition to full production in the third and fourth quarters of 2027. Rumsey said the B engine would transition to the new product at the beginning of 2028.

Separately, Smith said two Cummins subsidiaries issued a stop-use recommendation during the quarter to customers of HyLYZER electrolyzer products following a review of operational data. The subsidiaries have not initiated a recall and are evaluating whether modifications are needed. The potential financial impact remains under review and is not included in guidance.

Cummins returned $661 million to shareholders during the quarter through repurchases and dividends. In closing remarks, investor relations chief James Hopkins said the company expects another year of strong operating cash flow in 2027 and plans to return approximately 50% of that cash flow to investors. Detailed 2027 guidance is expected with the fourth-quarter earnings call in February.

About Cummins (NYSE:CMI)

Cummins Inc is a global power technology company founded in 1919 and headquartered in Columbus, Indiana. It designs, manufactures, distributes and services products used in commercial vehicles, industrial equipment, power generation and other applications.

The company's offerings include diesel and natural gas engines, power generation systems, and components such as filtration, turbochargers and emissions-control systems. Through its Accelera business, Cummins also develops technologies including batteries, fuel cells and electrolyzers for lower-emission power and transportation.

Cummins serves customers in markets around the world through manufacturing operations, distribution networks and service locations.

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