Cummins (CMI, Financial), a leader in power generation and propulsion equipment, exceeded Q1 2025 EPS expectations, driven by record results in its Power Systems segment. Despite this, earnings and EBITDA saw significant year-over-year declines, with net income dropping nearly 59% to $824 million and EBITDA margin decreasing to 17.9% from 30.6%. This decline reflects softer demand in some markets, increased costs, and the absence of prior year one-time gains. Cummins also withdrew its FY25 guidance due to economic uncertainty from tariffs, which could disrupt supply chains and increase costs.

Tariffs are a major risk for Cummins, particularly in its Components and Engine segments, where increased material costs or reduced demand could affect profitability.

• Power Systems Segment: Revenue surged 19% year-over-year to a record $1.6 billion, driven by strong demand in global power generation markets. North America and Europe were strong, fueled by investments in data centers. There was also robust aftermarket demand for industrial applications like mining.
• Accelera Segment: Sales increased 11% year-over-year to $414 million. This segment focuses on zero-emissions technologies, a key part of Cummins' Destination Zero strategy. Growth was driven by increased electrolyzer sales and advancements in hydrogen production technologies.
• Components Segment: Revenue fell 20% year-over-year to $2.7 billion, mainly due to the divestiture of Atmus Filtration in March 2024. The segment also faced weaker demand in heavy-duty truck markets, supply chain disruptions from hurricanes, and competitive pricing pressures in North America.
• Engine Segment: Sales decreased 5% year-over-year to $2.8 billion, impacted by declines in light-duty automotive and heavy-duty truck sales. Challenges included reduced pickup truck engine production and a slowdown in freight activity. However, the segment's EBITDA margin improved to 16.5% from 14.1% due to strategic pricing and operational efficiencies.

Cummins' Q1 2025 earnings highlight strong performance in the Power Systems and Accelera segments. However, the withdrawal of 2025 guidance amid tariff-driven uncertainty raises concerns about potential cost pressures and demand disruptions affecting future profitability and growth.