CMI - Earnings call transcript Q2 2024

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Operator

Greetings, and welcome to the Cummins Inc.

Second Quarter 2024 Earnings Call. On our call today is Jen Rumsey, Chair and CEO; Mark Smith, Vice President and CFO; and Chris Clulow, Vice President of Investor Relations. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Chris Clulow. you. Thank

begin. may You

Christopher Clulow

our Good discuss and second Cummins with Chief Jennifer XXXX. much. and Executive teleconference Smith, Mark quarter to today Participating our Rumsey, are today to results Officer. me and morning, very Chief welcome Officer; everyone, Financial our of Chair Thanks for the

to be We at end will available all of the questions answer the teleconference.

be meaning forward-looking note that Exchange XXXX. that and the hear hopes the or regarding information statements and some you of future. and strategies consist the the please given of start, Act will we Such of our Before Securities statements beliefs within today forecasts, on will of intentions express expectations,

of from projected differ Our actual forward-looking could future in those results and risks uncertainties. a statements materially number such because of

in the such the and of Factors disclosure quarterly in information forward-looking is slide any subsequently XX-Q. particularly available with the reports our recently Form in annual filings filed on More Commission, Risk uncertainties statement Form Exchange the report the on deck filed XX-K section and most and risks Securities regarding

this financial we course the of our of for non-GAAP to refer you call, and the will to website certain be reconciliation measures those financial measures. During measures, GAAP discussing we'll

cummins.com. I Jennifer of and now Our available Chair today's at kick webcast and turn Investor on the our the press presentation to you to CEO, our a will release a us with copy section Relations are statements over financial copy of Rumsey website off. within

Jennifer Rumsey

CEO take I'll discussion with and morning. year. financial trends quarter will through our discuss by performance you second financial Mark celebrate and X-year of more all you results. our then region. will sales of I a the forecast I our of outlook our details of for our I and both Cummins. second my Chris, with XXXX. with start end finish will market good for becoming of Then today you, excited I'm summary quarter be to Thank a anniversary as of

targets of with getting portfolio Destination a the we details and are our performance, customers recent The key second and strong on our to to long-term are we strategy. highlight major I that Zero execution few result from I our that our continued into raising the want of moment financial shared as Day, At Before accomplishments Analyst partnerships our take profile our strategy growth our a to strengthening forward. a have stakeholders and driving quarter.

designed further. we and new this year. market with In a quarter, even engine strengthened in for later applications launch Isuzu's and will medium-duty lineup. Isuzu global truck of other partnerships X.X-liter markets those for engine announced In for available Japan May, Asia markets on-highway Pacific Limited the use the this we Motors be truck power will This

in battery launch America. and include the electric announced lithium a Availability plans technology. We for battery Accelera's Isuzu's in to XXXX truck medium-duty of also ion North will F-Series or powertrain LFP phosphate is next-generation expected

as These for on-highway and Japan advancements our mark the Cummins market first Isuzu enters in Cummins important an both milestone for history. time the

strength partnership the to our and partners. for built, companies our of proud excited X leverage to and both are We collective have profitable growth I'm deliver scale

commercial America cells needs. customers' County, plant in of in industrial at a joint Cell cell evolving to our chain Marshall Cell new the and battery Daimler further enable production and venture Cummins by in now we States. formation buses with PACCAR supply quarter, United this partnership we to as our the breaking the applications our naming Technologies Trucks manufacturing focused Executive Officer localize and partners Accelera North Technologies battery Amplify Amplify as and our This known the included and Mississippi. Also progressed will ground in and on venture, completed the Chief joint serve of battery advance

was This era million next And as of Columbus, plant July, emissions significant smarter, feet cleaner of at powertrain existing forward Accelera Energy from leading is and power. the systems. the engine in space we continue electric into industry $XX battery convert XXX,XXX square awarded our manufacturing components, a our for to Indiana of packs approximately X step Department including

for million and largest also our Reduction grant Destination part engine-based The Act. related Zero $XX plant solutions, next-generation is Columbus solely and further federal in is the grant the where and awarded manufacture ever blocks Cummins Inflation The appropriations of engine as our the heads current to strategy action. showcasing we to

second demand of billion record our the products $X.XX second revenues X% company by America of XXXX. of compared and to and of resulting to for EBITDA pricing. some an overall increase the Sales many $X.X moving ago. XX.X% markets. remain compared our quarter cover our for $X.X and before starting Now performance key international for markets, in billion, quarter high North across a on or the markets strong quarter billion regions, XXXX, driven quarter key was of our improved I the were on second of or XX.X% XXXX continued Demand to year in comment largest the will with

as higher chain Second XXXX quarter supply quarter improved offset pricing the XXXX costs included and volume results increases impact separation of benefits Atmus related cost to of and Atmus. of exceeded dollars and of second compared separation. of EBITDA $XX gross the the the to million margin the

quarter revenues XXXX the driven our of strong the Our units, core $X.X billion, second levels. trucks Atmus. than grew Industry were by of impact the offsetting from separation of to XX,XXX demand X% in quarter X% in production America the more in markets second up North heavy-duty

from heavy-duty While were year X% unit ago. a XX,XXX, up sales our

plant. Revenues the XXXX, shipped volume Generation the Power our an XXXX. Jamestown Power performance from for Systems production increased Power profitability sales second at XX,XXX were using sales strong achieve Stellantis XX%, our from for America XX,XXX in outpacing Generation heavy-duty engines the XX,XXX, us levels the while also to of engines units data the in market We growth. The second Industry mission-critical record unit power medium-duty increase XX% North and quarter quarter was demand. Engine second of in X% XXXX, and trucks the by of up marked production up quarter XXXX X% in and in driven globe record America across center by impressive North The continued of segment. Ram helped pickups the and

X% Our second compared last decreased revenues quarter international year. to

X% $X.X a demand was as to run in higher Second truck continues volumes at for in demand. demand. quarter of year. a units, venture, China strong last for decrease X% domestic levels heavy-duty natural China, with from low partially China XXX,XXX with joint weak were higher including of in engines trucks offset data were Industry billion, center and offsetting orders and Demand revenues diesel gas weaker domestic medium- the decrease market exports

were units In at XX,XXX second sold, X% in ventures, light-duty China, up market units, of demand an of including increase our an in XX%. we XXX,XXX joint while from industry China quarter The was XXXX in units increase levels. excavators were the levels from XX,XXX, X% for XXXX

were sold new at XX% units, both units penetration export OEM a of and existing result QSMXX as Our of and increase growth. partners XX,XXX an

drive by business. driven This Power China our of Chongqing at Generation venture in helped aggressive joint Cummins quarter, Sales demand financial the increased in Systems XX% data accelerating in performance primarily within equipment second Power centers. our

from a ago. benefited quarter revenues the of decrease Second regulation in $XXX Power while were quarter India, year of XX% pre-buy XX% a the ahead of truck by increased production second venture, as joint quarter XXXX million, revenues decreased from our by XX% second by Industry shipments emissions X%. including increased Generation's year-on-year changes. demand

XXXX, outlook markets. comments individual our provide and regions Now let on including me for some end

have the than North first anticipating second half America raised primarily in for while XXXX We the heavy-duty expectations truck our be half, to weaker the still market.

our to prior down of compared guidance increasing to X% revenue are to flat down We X%, X%. guidance down to our

to guide We guide our are also compared XX.X%. XX.X% XX.X% to to of prior increasing be XX% our to EBITDA

We now Distribution expectations slightly segments, the revenue revenue Accelera Power business. higher and lower our in offsetting for expect Engines, Systems

Systems stronger We the and Engines also improvement profitability EBITDA. in driving most expect our in of Power segments,

half. America by in guidance a temporary orders. from vocational we continue as be are to planned drive with XXXX, Consistent our North the changeover for forecast an to likely engine production are to America in to benefit with XX,XXX from XXX,XXX guidance, X% strength forecast and to XXX,XXX the pickup be units the and to our our XXX,XXX trucks dip XXX,XXX be second flat in expected increase North units, in we previous in an XXX,XXX heavy-duty we year. In America in North units raising truck half the XXXX up maintaining are softening to is in elevated to trucks in second medium-duty We a prior as still shipments year market, model expect for from our our This XXX,XXX of to XXXX. backlog

prior revenue, total In India, increase driven including strong to project X% and increase ventures, with in we primarily ventures, Generation project joint demand. XXXX, by our XXXX, to guidance. China, joint total including in In on-highway Power revenue, X% we consistent

be We for the up to for to trucks flat X% demand expect industry year.

to we with consistent guidance. year-over-year, global construction, For XX% project flat prior down our

expect We slightly export slowing demand in continue China. to property weaker investment and

up be in prior to guidance of and for to markets. guidance XX%, expected engines guidance. Sales up X%, the with the market prior generation of by center are continued power We to raising down data up consistent to are to X% increases XX% to global driven our our compared be XX% mission-critical XX% our mining

holding For the on- markets. guidance with in aftermarket, decline demand of flat have we for up better of our XXXX, off-highway X% improved bottom raising of a to end guidance than to previous X%, and expected our up

to of guide. from expect In full a we Accelera, the million, to reduction $XXX be million prior $XXX year million $XX sales

impacting As at is more our the Analyst progressing and slowly, energy transition revenues. we electrolyzer Day, e-mobility our noted both

coming raising to and on XX% X% raising year, down to a half to first EBITDA XX.X%. flat we off summary, strong sales are of our guidance the to our In guidance

half in bringing future momentum Should strong Cummins technologies and growth, to we America heavy-duty a second several softening While market strong. the North remain markets customers investing in of is shareholders. of the year, the demand new keep to core cash in returning economic in slow, position to our anticipate in

X.X% In dividend which announced an we July, increased increase dividend. XXth consecutive share, we the in year $X.XX per the quarterly $X.XX from in the have to

our with plan of consistent to XX% to the shareholders During of cash approximately we million quarter, form return $XXX operating to our long-term shareholders. the in dividends flow returned

number with the Our average in split reflected Atmus fully the diluted from benefited outstanding share per shares the of quarter. weighted more in the a share earnings second lower impact of count

for had see in markets. a grow grateful with business to I'm It customers in the is yield and to Cummins partnerships operate. for customers markets previously strategy our solutions long-established driven our help performance of deliver untapped our to demand strong additional in on In markets comments. employees and products newer first record summary, XXXX, who we that they in by core our half continue see wherever opportunities for exciting existing our win execute

results delivering solutions while to cash Our our reflect dedication industry our our strong our also investing future returning performance in to growth, shareholders. decarbonize bringing and sustainable to financial

we in Day, excited As there lot be future. to discussed our a at is about Analyst

Mark. let over Now to turn me it

Mark Smith

the and Thank good morning, delivered in second quarter. you, We Jen, everyone. strong results

the Given and the improved of those for raised our midpoint of strength expectations year our outlook, results XXXX. full we've

X%. growth were in revenues North Atmus. billion, X%, of driven America more sales a increased from while organic separation year as decreased in quarter $X.X reduction the than the up offset by Sales international ago, Second revenues X%

fluctuations negatively currency impacted X%. Foreign by sales

or to The ago. pricing as improved The separation and billion to numbers costs as or the Atmus. of a of drivers the primary benefits of $XX separation $X.XX included year XX.X% well was million the the profitability. ago of sales EBITDA volumes higher related behind the billion the year of compared XX.X% quarter were absence $X.X costs for

of average line the $X.XX Now a also item. removal by ago. compared XX.X% compensation $X.XX more quarter were primarily billion venture weak year. Joint in sales driven technology China. was year, admin or prior expenses. Atmus compared XX.X% XX.X% and billion billion primarily and and of fees for and or pricing driven to Other research income decrease higher Selling, a million increase go into the income a $X.XX I'll favorable were by to operational $XXX flat $X.XX primarily billion, the year detail year from $XX of decreased million of margin sales improvements, Interest XX.X% year, was little by truck $XXX Gross expenses offset interest million, by an by or a was million, margins driven of $XX market million million domestic $X prior lower last from weighted of higher rates. expense ago. the negative $XX

were tax The XX%, share $X.XX diluted of tax or discrete was year. diluted the per last in quarter items. in or share rate earnings share $XXX million diluted all-in million the All-in for favorable net to compared $X $X.XX quarter million effective per including or QX $X.XX $XXX per

reflected the share the as count a of exchange quarter first share second in of lower The average separation tax-free as Atmus was result completed weighted final the of the step quarter.

of All-in, and second in of the regulatory payment the operating compared driven the $XXX cash last agencies. million $XXX the with required flow settlement an was million agreements year, by outflow an $X.X decrease mainly by the billion inflow quarter previously disclosed was to

the last more Excluding flow $X.X year. the of cash the operating than generated billion, double was settlement, inflow quarter second an cash in

will comment I performance on our and segment XXXX. for now guidance

results until the for Atmus XX. a XX.X%, segment Components decrease both and full to operations XXXX the the Atmus revenue the in prior EBITDA was March consolidated up of from on while from occurred our guidance year EBITDA reminder, $X separation. by primarily XX.X% decreased As with a XX% sales impacted billion, of of that separation includes sales

For consistent our XX%, EBITDA to with previous range we expect XX.X%, to range to narrowing decrease XX.X% XX.X%. margins our of XX.X% the revenues and the projections in from of X% guidance Components, to XXXX prior

second China. Engine by a year increase revenues slight $X.X was income, costs the on-highway billion, offset North record year a higher of joint America benefit was segment, ago a research and from X% volumes as XX.X% in and venture an a quarter from the pricing ago. in decrease primarily lower For from record EBITDA XX.X%, were

points Engine midpoint American from driven For year X% XXXX, North outlook X%, for the a the now up in increase the medium-duty X% by revenues down be full we to project the business revised of to the prior an and ongoing the an market. Full range from XX.X%, EBITDA operational midpoint increase is efficiencies. at prior volumes to XX.X% to be year XX projections to due in our Engine truck projected of of higher

of margins. Distribution segment, EBITDA to due for ago a the have expenses XX.X% billion. primarily mix year company compensation from higher $X.X revenues decreased and a Generation XX.X% ago, a year to impact sales, of positive sales increased Distribution higher percent on the a a X% In overall, record which to but Power to dilutive compared a as segment are the

due from of prior up in revised the expect XX%, now we've an generation XX.X%, XXXX to margin X% to to markets. down prior Distribution be power stronger range of revenues We our EBITDA And to from XX.X% the XX.X% to to expectations a increase X% our midpoint, mainly little be range of XX.X%.

power Results billion, increase set Revenues other a X% to cost quarterly improved and increased higher new were particularly pricing and by XX.X%, EBITDA from driven record. the Systems and an Power segment improvements volumes, markets, of $X.X in generation for operational XX.X% reduction. and

now XX.X% increased projections by projected to XX%, be XX%. Accelera up is EBITDA XX% prior from $XXX revenues million, the previous XX% XXXX, guide. For X% be of to expect electrolyzer to Power to the an up to Systems X% revenues from to driven increased X%, of installations. year increase we approximately

we of assess compared costs Our growth strong EBITDA the we ago EBITDA future. the expected, continue an products the as for extended those of to in have where and to million loss invest capabilities $XXX in is areas to reducing where a into business million was parts support whilst the growth $XXX prospects loss year

still to $XXX revenues losses be in In $XX to $XXX expected the XXXX, the million, Net of in range we to prior $XXX of guide. expect million million. from million our to Accelera range be $XXX down million are

in guidance. revenues mentioned, quarter and have performance be points X% raised is guide. XX our the margins to second better flat, prior Jen from XX.X%, basis region to XX% our we X% projected revised are be X%. key expect the and year than which midpoint outlook previous the markets, down now in the full approximately to our the We our increasing of guidance end EBITDA company strong given As down to narrowing to down now range

excluding gain expected of rate make billion, continue to billion the other from critical expansion XX% tax-free tax discrete approximately in $X.X in new we investments effective Atmus and will $X.X XXXX, range related support Our unchanged Capital capacity be items. in months ago to to X be the to is as investments and growth. to future products

We've In summary, half year, second we in markets delivered do XXXX. second We reduce in some took the of first in as heavy-duty American moderation reduce XXXX the of to Analyst of key expect in XXXX. North especially record sales the and some the to fourth steps we cost pointed solid we quarter quarter the our profitability of truck, some out still costs and recent -- also. Day some at quarter taken

well We continue to to we business to our navigate any leaving identify us economic experience. that streamline going forward, ways cyclicality positioned may

We for over continue cycle still to performance our deliver strong future financial results growth. cycle raising while investing

Our for for Overall, year reduce for time debt. dividend growth, very increase this and your remain strong reinvest for a to the allocation capital priorities quarter. Thanks today.

Now to over let turn me Chris. back it

Christopher Clulow

Thank call, related ask others to to I you, a you would on limit follow-up. consideration one Out the of question and Mark. that yourself

our question, If you additional join ready Operator, queue. have we're an first for question. the please

Operator

first with UBS. Our Steven the of comes from line Fisher question

Steven Fisher

a do the didn't to support your incentives truck, you're there. about on it that conservatism into materialize how your expectations Or outlook? not Wondering new you some you anything Just place of in put thinking sales potential in that there? year. change the the half of point of China government second may much the think in there Is

Jennifer Rumsey

and the over government last may of of the translated and Thanks in been any consistent XX economic out change meaningful none pretty to performance our We've really has Steven. take, question, industry. seen into indications the Yes. months, which XX previous conditions the there's for actions China of

So still diesel gas near strong really, weak natural relatively term. we're product, the that and in anticipating changing an market seeing and with export the performance not domestic are a

Operator

question Securities. comes from with the next Our line Jamie of Truist Cook

Jamie Cook

on a margins pretty are muted a guess the and quarter. Systems sales assumption Congratulations in questions. nice Power for two Mark, on clean One, quite remarkable growth I XXXX.

just So these the structural margins sort there, improve already what's given you're if close in see you what's years margin opportunity and this the XX% on you year? us help to out from understand levels do to for of going a assuming could

-- you Jen, Is you're know XXXX, with Chevron, question, are with that second potential overruling there about guide then the don't the guess markets? about back conservative the thinking but be of U.S. to gets the the a -- the comes as election more and I Systems. think my then for the I think And potential -- just pushed give how want change you you prebuy? out? would Do Power X positives a and China you about

on So ultimately, China? in XXXX better prebuy Systems better potential muted wondering, a Power incremental I'm assumptions with margin XXXX the is those with mix in from

Mark Smith

with We'll in questions. answer of your and fit do come. there's the time this question, to Systems, Good evening. part available really to Okay. still Power X try last expect there's On to margins. And for the our us elements the answers more yes, we

we're side. there a environment with And there's doing yes, strong pricing the some to operational reprioritizing team more investing, we're where Power cost reduction, the the job. investing Systems on is on efficiency. do where then So Started less, fantastic

driving what's bow the more the still terms come. to to been of and strings several it's really, So results in

segment. and drivers from quarter, Systems. So we're we're have to the on deliver from the to Those the and are in Bush team here Day Jenny you bullish and Hopefully, main second the on Analyst confidence really really, the that felt continued Power really excited.

Jennifer Rumsey

soon, letting talked market, I that high the we in outlook, there, up Yes. advantage there. demand, as some May, see have I about market and is where particular take that in gen continued backlog. strong growing making investments And anytime we And to say we know, you data capacity of market what the on the growth in would see the in center, the power don't

We rates And XX% strong quarter the U.S. of do coming the half see In up that for continued the see down and we don't has future. heavy year. be about in on-highway, duty, demand down, foreseeable and the medium-duty strong. and third truck overall backlog projecting build see letting XX% to the in second

will with historically demand. a these our the economic lower year is well impacted the that's next and because, happen customers' what truck spot level environment And and at of stabilized prices been question some rates than are broader they've

that so comes with And together prebuy. a how

believe move greenhouse of the timeframe. X to will gas overturning that the Court anticipate And any in see regulations what near in impacting probably we XXXX Chevron Supreme regulations We with The we the the deference, is don't question Phase bigger forward. XXXX term. continue

changeover. so that couple has emissions still And industry prebuy also constraints ahead the the that amount we there's capacity anticipate But seen of last some in demonstrated of of we've years.

be, think will 'XX I still into pre-buy we're that we but regulation go have large how to demand preparing change. is a So the as strong question,

Operator

line Volkmann with Our next question Steve Jefferies. the comes of from

Stephen Volkmann

Mark, sounds double-click I bit? positive. positive about year? being are mean was much It just the think you little you how sort that And pricing Trucks. rest for for the we seeing? mentioned, maybe that It both of in you in was of it Power how of I a should Can you, Gen. like us think positive on like sounds pricing it

Mark Smith

Great Yes. questions.

definitely a segment, X.X% been really Systems lot, and that the but the changed company, varies an it the driver mostly across much Power to should not think I by it's average, all the but in vary results, going very hasn't year, of on but for year-over-year it So And results. the increase important hold across That's don't quarters. has changed.

Operator

question comes Jerry the from line of Goldman Revich Our with next Sachs.

Jerry Revich

ask anniversary. platforms wanted the I right? to are engine picking medium-duty you globally, So on Daimler's happy folks up business. Jennifer,

tough if how don't to that expand years place able you Can versus, talk XXXX timing Can you call ship more the And I economically? folks to you to Is X know, given just Now folks you transition? it about currency. or expect us are import into medium-duty picking to of X and do business about comment just up many the Japan. you Isuzu's engines given just could it, how talk a ago, the you're in on product Japan. globally

Jennifer Rumsey

sure. Yes,

this seen that last of the few playing start and you've now regulations years over as out announcements some So to the occur. trend we've made

we're as growing and the in to customers some us transitioning as U.S., of other course, demand U.S. in medium-duty like Isuzu with here seeing So the Daimler well Hino

growing now in the market our medium-duty So in here. the launched We've position Daimler. India product we're with medium-duty

So we'll start there. to see volume some

regulation Their really by is strategy driven change.

when So will see with Brazil, to Europe grow regulation Daimler. you in change we volume and continue

On building the that BX.X new in business, are Tochigi their Isuzu we plant in Japan.

So we're not it the importing building that engine. market. We're in

market. time, years. in First off-highway we've there, been the for the course, in been We've on-highway market of many

And volume so global as and slow Asia And that year. launch into they'll noted, there growth we'll some Japan. see this Pacific markets other truck in then then later I

So grow year-over-year medium-duty Cummins adds. growth, and new space emissions you're the see and partnerships would from in these steady to I just regulations change say, as customer going

Mark Smith

India and Brazil to the later XXXX...

Jennifer Rumsey

XXXX through XXXX.

Mark Smith

Yes.

Operator

comes question Morgan Stanley. next Castillo from with Angel Our the of line

Angel Castillo Malpica

unpack just quarter. we Engine little bit could hoping more the on I segment. strong the was a Congrats

on the how talking are outlook raised You been about your just decelerate you driving us about just margin about duty. kind improvement ultimately that talk improvement? is heavy-duty quantify you margin to second kind driving components And there? of XXXX what's of think that as thinking side, helping and medium and But the your half expected there margins, can about you've the in we

Mark Smith

Yes.

a bit improved the We've So we've parts got outlook. of help. little

first of the the company quarter in into outlook of help since medium-duty a year. trucks. fourth the last fourth quarter quarter into -- the stronger the second this in So taking that measured Those We've across year. some half certainly of should the then half second with costs lower And got helps we've year actions overall. of been some

to down the X get profitability by not segments. So those key the elements. breaking are going really into We're

Those still I room the conversion and us most general are on in improvement real No quarter just change of improve. showed the helped Yes, pricing for in the more second really things efficiencies. operating have that in segments. in there's the volume X think the

Operator

with of Evercore Raso Our from next line the David question ISI. comes

David Raso

The One the skeptical area on of where some is guide. like little a -- second area it builds soft the And the quarter you're I'm year, duty one through you half business, has X% upside. My question I'm the guiding on double have down the that. truck seems digit on business parts fourth mutes only revenues heavy light model year-over-year. down to go though The the trying the change. Engine just

Off-highway ag and declines comp China but a in construction. some better, fees, little in big

So is there's new the going at sequentially revs. that all the down the understand margins can revenue XX to on why penetration go enough customers I'm lower same X%? trying Or of time, against and bps only down it that push Engine

year-over-year fees. Revenue And I second upside you're less Gen. in the at Power margins X% half. comp growth then I Power within is piece are the the industrial first understand the than can are X% And be half, over up in sequentially. the down mean but down, there least

little a I more minimum, to capacity, at pricing. little right, I'm understand, good assume Power a being So more has focus, Gen just a pushed trying

the that or just us why it's Gen, Power on again, more Engine and comfortable maybe -- So make on if you conservative can conservative, guide?

Mark Smith

question. David. Thanks, Good

Systems, Power fundamental on I think there's I changes. don't any So think

much do and product And margin. The we conversion. quite the customers key So a how for -- do raising given really We've a deliver our to is range much frankly, it's outcomes we business how the performing like we're well. of capacity.

don't go is the business above, a we're the well. doing strongly. but on The I profitability think really lot sales leaning yet So will

So and there, to I concerned be don't outlook. think we've raised the there's about much

some to revenue revenue. is takes the cost those the reduction better those the taken I puts on On important think the margins at outlook the the part for year, levels, reasons during parts. margins, And actions business, mitigate But are just then guess, some the the helping up. and hold really is, why which what's of Engine we've the most of that I slightly we there's expect

Operator

with question JPMorgan. the next line Zakaria Tami Our from of comes

Tami Zakaria

X segment. clarification distribution is have I questions. quarter. the on quick nice Very One

margins think lower, great. were were but I sales

is So prudently to margin this anything other that? be need from conservative? headwind of Or then a costs. the price question aware is guide mix for on there Gen? Power And that is I is Or function of the

X.X% I are year? cost some you material price you the coming level. of improvement still expect the enterprise expect just Since for prices you the down, raw in price do said think at some

Mark Smith

probably to not XX Distribution, different is We've then segment. latter, there the the on And categories right and got basis significantly. margins. to you're about business cost headwind by So points point out across the of all

yes, little really obviously Power there's the Distribution, relative So Power a dilutive Systems, the accretive. very rest segment, for is -- within to it's even of Gen though bit

So that's that We've true. out. called

quarter, second out the merit and be there in results. some called that first didn't the in Also the was to charges overall individual modest

merit we're they potential say for of a are got significant have bit. lot to do reflecting believe still trimmed really a we where So the margins over margins We improve time. but year. just don't just commentary, therefore, And the distribution little they've

going that's So on. what's

Operator

comes Our Thein the next James. Raymond with line of Tim question from

Timothy Thein

factors. get I'll thinking the I segment. part we North And America And the as and Obviously, maybe heavy-duty Mark. market around quarter-to-quarter. shares, get the hook. picture combine just shift I'm these is around imagine share in any Cummins those absent standpoint expense likely kind first before both just half just Actually from pertaining vocational. big a where of specific impacted can that, to programs do disproportionately the of softer at back from OEM I a year other the and is perspective, favors just of would sleeper segment that the a production

your that. on maybe thoughts just So

have quarters, Obviously, choppy more but the kind of of the And some the commentary Parts OEMs second been few softness there. recently reported business. has positive, seems past it is be have part and that dealers whereas flagged to then just the a on

that fleet comment kind you you I'm year curious, can of If on driving things. What's or that? So of customer absence those last is X that through just just an destocking better utilization? just went

Jennifer Rumsey

Yes. a OEMs are always customer pull you doing I different we mean, work well capacity of question. to Great. goal for have compared product market as see the stronger that noted, and our bit incentives market create shift product But products. segments. the demand course, the for the that's time. Cummins as And been have customer across -- to different generally, segments Thanks best you of portion create as pull But the around can stronger we around now. the But could that's for what of the over and shift as that you segment, and the truckload, heavy-duty little as to vocational that said, for is right between the

the of because this the and between and pretty was been more demand in normal was that driven to some disruptions big hard On it the bit a reduce demand levels separate down focused little back all inventory last inventory it's levels, destocking factor. also to were have was destocking coming carried that we There effort somewhat a and the inventory Parts, of market. year to a seeing

you into markets. now And settling demand off-highway solid pretty see see so our us and on- what and we in both as steady

Operator

Noah comes Oppenheimer. line question of Our from next the Kaye with

Noah Kaye

the it Maybe hoping order demand is the and on books the what's far the back looking to basically in get OEs? for response the XXXN? the an expectations How update How is half? it for from tracking so

Jennifer Rumsey

with with out month DTNA, the this demand launching of in we market No, are some Yes. develops product the really and for the launch see got that time the goals Great. over that it offering year there. early some to we'll PACCAR. get fleet customers that we'll it more have sustainability other customers. and so big how Excited with and next from have then those Thanks question. in fleet We've market,

for demand get we in that market that to market, in about we've I costs to And up so up drive to and to for could develop sustainability the to X% and up. projected going these us it's to take some operating think get but level goals time

Operator

Our Research line Partners. comes Kauffman with Jeff the Vertical of next from question

Jeffrey Kauffman

the how I and try just Power? this When victory and American year show XXXX do engines? X in for victory know but really off early on you November, a believe into thoughts on going, to an projecting maybe outlook you're we're we Democratic change any and it's the or the to and a And election and engine wanted for or comparisons New I a way carry we don't positive the half races. have to the start second weak Engines this the follow I in think which prebuy potentially or for then because just Republican perception then might North of kicks that quarter we're a slowdown up there's that

Jennifer Rumsey

Yes.

to we demand, that heavy-duty had cycles the past expectations. This wish out. crystal this could cycle of the going demand of then, had course, very has because terms how play we pent-up in all is and into a project So we that different been ball than pre-buy of seen getting

to that. economic a we'll difficult to start and role point what improvement conditions in really play certainly will next it's So year predict see at

So to softening steps recovery. prepared I quarters. when, for be over I'm the few going exactly at taken that we'll in year, some next see next we've And project to but point think not the

worked What the election, is, not the make we and are. say administration. the our we either. as of in past worked make that appropriately the going I will We Trump reflects are on in and prediction Biden party terms In with policy and and to lines opportunities the across regulation what with a administration, that again, worked that one to always, I'm those the industry understood sure challenges

do with regulations its and time do continue front that about Destination recognizing that in industrial at our do economic a will to to you are of to incentives in appropriate that. applications We need decarbonize and And industry commercial of core over us. and to particular the is take importance how regulation strategy Zero steps the and the that

So we're going to for continue to advocate that.

United is transition. into and Reduction money the navigate across allocated Act and come jobs those we're has and States out how we'll that that [indiscernible] we continue the energy of of flowing points been some and Inflation opportunities market And the and facing the has creating and the challenges the

making for regardless is but really in investments plays I well of preparing is industry, positioned think how of Cummins that. the course, out, that

that want And regulation, have make importantly. stability most to so and we sure we

Mark Smith

a over business And for -- is of market, lot of the the of part the to because part medium-duty stronger. there's investing duty. time, know I new I strength heavy demand actually getting We're mentioned of just as we the raise questions because But capacity about earlier, we've won.

volatility about questions about So right term near lot right we're on what sustained told there's and down the more in a high heavy. and now. But medium-duty going now, change the the being less for Things demand is question based it's expectation now. Clearly, economy. can is less marks

Operator

of Our the final Menges line Kyle question from with comes Citigroup.

Kyle Menges

running really how little like a think exit standpoint. the Systems think the about you on year it and some from focus look I -- capacity from seems the pretty making? to And units. the a and or around might into just the about could hot capacity year doing just capacity math, and would standpoint, investments you're how basis XXXX it bit you're assuming what wanted dive unit year outlook and the into remainder XX,XXX the with the a deeper like, so the annualized year seems then of an for shipments that unit exiting you the and like be curious to capacity Power looking on of capacity for I'm

Mark Smith

unfortunately, just a there's lot variation, applications. that more and engines Well, the range in wide such of of business, there's -- right? There's a

markets and key I of would but say, think we're global on-highway going where one. this capacity, supporting explanation towards, as products That's not which narrower Jen the so -- don't center secular there's unfortunately, Bush obviously, for it's a there's the it be, market. not about one the Analyst increases the simple a a dramatic talked range Day. year, which data And is theme, working across be capacity to at it's

segment. It varies by

months. has dropped more over consumer-facing the our of Some demand last segments, XX

capacity there's more So some there.

in variation pricing, very thumb product confident investment by it our general I isn't in feel quite where rule that some a We the we We like applications, much is through next reorganizing make we going as end around segment. guide can of feel the world. theme of the on into revenue confident applicable production depends But -- the unit year. year. some market. capacity, about So this in the revenue support for the unfortunately, that because But just the the products,

Jennifer Rumsey

only X-megawatt adds What to a the in the absolutely and year on running supply is, at center at base center us. add happen helped Yes. additional worked in is capacity, and market. we really production platforms, then and hard data the first XX-liter are half particular, the accurate product, was Centum key thing The which launched seen our that's of which point, to data so the Mark's I'll that's liter, we XX able comments, including now which and run this you've

we're of continuing constraints us, data that platforms next in couple the launches is take into selling run some the market, capacity up able to supply improvement modest product revenue and years. to investments be some making as increased The well chain of the what as particular, helped we're we're in new the But to over on into why center which market. capacity

Operator

for reached end the closing back remarks. call question-and-answer I'd of over like session. have turn to We the our to Clulow Mr. any

Christopher Clulow

today. participating everybody, for concludes Thanks, today. for That it

you. the always, team the of be questions available Thank further for after As and throughout the Relations week. Investor will Bye. the call rest

Operator

today's concludes This teleconference. you. Thank

lines You have your participation, Thank a time. wonderful this at day. may and for you disconnect your

Cummins (CMI) 1 Aug 242024 Q2 Earnings call transcript