# Cummins (CMI) Financial Model Free Excel 3-statement financial model and company analysis for Cummins. - Canonical: https://finamodel.com/companies/cummins - Industry: Industrial Equipment - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/CMI.xlsx ## Model Purpose This model provides a comprehensive equity valuation and scenario planning tool for Cummins Inc. (CMI), enabling analysts to assess the cash flow impact of the company's "Destination Zero" energy transition strategy, the integration of the Meritor acquisition, and the structural changes following the Atmus Filtration Technologies separation. ## Company Overview Cummins Inc. designs, manufactures, distributes, and services a broad portfolio of power solutions, ranging from advanced diesel and natural gas engines to electric and hybrid powertrains. The company is a critical supplier to the global commercial vehicle, mining, marine, and power generation industries. Business segments based on FY 2025 revenue contribution: * **Distribution (30%):** Aftermarket support, parts, and service across a global network. * **Engine (26%):** Manufactures diesel and natural gas engines for heavy-duty, medium-duty, and off-highway markets. * **Components (25%):** Axles, drivelines, brakes, suspension systems, and emission solutions. * **Power Systems (18%):** Standby and prime power generation solutions, alternators, and related systems. * **Accelera (1%):** Zero-emission technologies, including hydrogen fuel cells, battery electric systems, and electrolysers. The business model is asset-heavy and manufacturing-intensive, though the Distribution segment provides a highly profitable, recurring aftermarket revenue stream. Cummins holds a dominant market share in North American heavy-duty truck engines and is a leading global independent engine manufacturer. Recent major events include the $3.7 billion acquisition of Meritor in 2022 to bolster its axle and brake capabilities, the full separation of Atmus Filtration Technologies via an exchange offer completed in March 2024, and a strategic restructuring of the Accelera electrolyser business in late 2025. ## Revenue Deep Dive **Distribution Segment** * **Revenue driver formula:** (Installed Base x Service Frequency x Average Repair Value) + Whole Goods Sales. * **Historical growth rate:** 5% to 10% CAGR. * **Key growth levers and headwinds:** Driven by the ageing of the global commercial vehicle fleet and increased complexity of emission systems requiring specialised service. * **Pricing dynamics:** High pricing power on proprietary aftermarket parts. * **Seasonality:** Relatively stable, though extreme weather can drive spikes in power generation service needs. **Engine Segment** * **Revenue driver formula:** Heavy-Duty Units Sold x ASP + Medium-Duty Units Sold x ASP + Off-Highway Units x ASP. * **Historical growth rate:** Cyclical, typically ranging from -5% to +10% depending on the freight cycle. * **Key growth levers and headwinds:** Highly dependent on North American Class 8 truck build rates, global freight demand, and emissions pre-buy cycles. * **Pricing dynamics:** Contractual with major OEMs (e.g., PACCAR, Daimler), with raw material pass-through mechanisms. * **Seasonality:** Q4 is often strong due to OEM production schedules, while Q1 can be softer. **Components Segment** * **Revenue driver formula:** OEM Vehicle Build Volumes x Cummins Content Per Vehicle. * **Historical growth rate:** Distorted recently by the Meritor acquisition (added significant scale) and the Atmus divestiture (removed filtration revenue). Underlying organic growth is 3% to 6%. * **Key growth levers and headwinds:** Benefiting from the Meritor integration and cross-selling, but faces headwinds from the transition away from internal combustion engine emission components. * **Pricing dynamics:** Highly competitive, volume-based pricing with OEMs. **Power Systems Segment** * **Revenue driver formula:** Generator Units Sold x ASP + Industrial Engine Volumes x ASP. * **Historical growth rate:** 4% to 8% CAGR. * **Key growth levers and headwinds:** Currently experiencing massive tailwinds from data centre capacity expansion and grid instability, driving strong demand for standby power. * **Pricing dynamics:** Spot and project-based pricing; strong demand has allowed for margin-accretive pricing actions. **Accelera Segment** * **Revenue driver formula:** Electrolyser Megawatts Deployed x Price per MW + ePowertrain Units x ASP. * **Historical growth rate:** High double-digit percentage growth from a very small base. * **Key growth levers and headwinds:** Dependent on government subsidies (e.g., US Inflation Reduction Act), hydrogen infrastructure development, and fleet adoption of zero-emission vehicles. * **Pricing dynamics:** Early-stage, project-based pricing; currently operating at a gross loss as scale is built. ## Cost Structure ### Variable Costs / COGS * **Breakdown:** Direct materials (steel, cast iron, precious metals for aftertreatment), direct manufacturing labour, inbound freight, and factory overhead. * **Gross margin range:** 23% to 26% over the last 5 years. * **Key input costs:** Highly exposed to steel prices, platinum group metals (PGMs), and logistics costs. * **Scaling:** Step-function scaling. Manufacturing plants have high fixed overhead; volume leverage is significant when capacity utilisation exceeds 80%. ### Operating Expenses * **R&D:** Typically 3.5% to 4.5% of revenue. Crucial for the "Destination Zero" strategy, funding the development of fuel-agnostic engine platforms (HELM) and zero-emission technologies. * **SG&A:** Typically 9% to 10.5% of revenue. Driven by the extensive global distribution network and corporate functions. * **Depreciation & Amortisation:** Approximately 3% of revenue. Intangible amortisation increased following the Meritor acquisition. * **Restructuring:** Frequent adjustments recently, including the late 2025 Accelera electrolyser business strategic review charges ($458 million) and 2024 severance actions. ### Margin Profile * **Gross margin:** 23% to 26%. * **EBITDA margin:** 14% to 17.5% (FY 2025 reported at 17.2%). * **Operating margin:** 10% to 12%. * **Margin trend:** Expanding in Power Systems and Distribution due to pricing and data centre demand, while Engine margins are stable. Accelera remains heavily dilutive to consolidated margins. ## Balance Sheet Structure * **Total assets:** Approximately $32 billion to $34 billion. * **Key asset categories:** Inventory, property, plant and equipment (PP&E), and goodwill. * **Goodwill & intangibles:** Represents roughly 15% to 20% of total assets, significantly elevated since the 2022 Meritor acquisition. * **Working capital profile:** * **DSO:** 50 to 60 days. * **DIO:** 70 to 85 days (inventory-heavy due to complex global supply chains and aftermarket parts stocking). * **DPO:** 55 to 65 days. * **Net working capital:** Positive and a use of cash during growth phases. * **PP&E:** Manufacturing facilities, tooling, and distribution centres. Useful lives typically range from 10 to 20 years for machinery and up to 40 years for buildings. ## Capital Expenditure & Investment * **Capex as % of revenue:** 3.0% to 4.5% (typically $1.0 billion to $1.4 billion annually). * **Maintenance vs. growth:** Approximately 60% maintenance and tooling for existing platforms, 40% growth (heavily skewed towards Accelera and new HELM engine platforms). * **M&A pattern:** Historically a bolt-on acquirer, but the $3.7 billion Meritor deal was transformational. The company is currently focused on integration and organic investment rather than large-scale M&A. ## Debt & Capital Structure * **Total debt:** Approximately $4.5 billion to $5.5 billion. * **Debt/EBITDA ratio:** 1.0x to 1.5x (very conservative leverage profile). * **Credit rating:** A+ (S&P) / A2 (Moody's). * **Key debt instruments:** Senior unsecured notes with staggered maturities, supported by a commercial paper programme and revolving credit facilities. * **Interest rate profile:** Predominantly fixed-rate bonds; weighted average cost of debt is approximately 3.5% to 4.5%. * **Share repurchase programme:** Highly active. Management targets returning 50% of operating cash flow to shareholders via dividends and buybacks. * **Dividend policy:** Progressive dividend policy. FY 2025 dividend was $7.64 per share, yielding approximately 2.5% to 3.0%. ## Cash Flow Characteristics * **OCF conversion:** Operating cash flow typically exceeds 100% of net income, driven by high depreciation and steady working capital management. * **Free cash flow margin:** 6% to 9% of revenue. * **Major non-cash items:** Depreciation, amortisation of acquired intangibles, equity in earnings of joint ventures (particularly in China), and recent restructuring impairment charges. * **Working capital cash flow impact:** Inventory builds consume cash during cyclical upswings in truck production. * **Cash tax rate:** Typically 21% to 23%, closely mirroring the GAAP effective tax rate. ## Sheet Structure 1. **Assumptions:** Hardcoded drivers for macroeconomic indicators, segment growth, margins, working capital days, and capital allocation. 2. **Scenarios:** Base, Bull, and Bear cases toggling North American Class 8 truck build rates and Accelera adoption curves. 3. **Revenue & Segment Build:** Detailed build for Engine, Distribution, Components, Power Systems, and Accelera. Must include intersegment elimination rows. 4. **Income Statement:** Consolidated view mirroring the 10-K, including equity, royalty, and interest income from investees. 5. **Working Capital:** Schedules for receivables, inventory, and payables driven by DSO, DIO, and DPO. 6. **PP&E & Intangibles:** Capex, depreciation waterfall, and amortisation schedules. 7. **Debt Schedule:** Tranche-by-tranche bond maturity profile, commercial paper balance, and interest expense calculation. 8. **Balance Sheet:** Standard format ensuring Total Assets equals Total Liabilities plus Equity. 9. **Cash Flow Statement:** Indirect method starting from Net Income, adjusting for non-cash items, working capital changes, capex, and financing activities. 10. **Valuation (DCF):** Unlevered free cash flow build, WACC calculation, terminal value, and implied share price. 11. **Joint Venture Schedule:** Specific schedule tracking equity income from unconsolidated JVs (critical for Cummins' China operations). ## Key Financial Relationships 1. `Engine Segment Revenue = (North American Heavy-Duty Units x ASP) + (Medium-Duty Units x ASP) + (Off-Highway Units x ASP)` 2. `Distribution Segment Revenue = (Global Installed Engine Base x Average Service Hours x Hourly Rate) + Parts Sales` 3. `Power Systems Revenue = (Data Centre MW Deployed x Price per MW) + (Industrial Alternator Volumes x ASP)` 4. `Consolidated Revenue = Sum of Segment Revenues - Intersegment Eliminations` 5. `Segment EBITDA = Segment Revenue x Segment EBITDA Margin` 6. `Consolidated EBITDA = Sum of Segment EBITDAs - Unallocated Corporate Expenses` 7. `Joint Venture Equity Income = JV Net Income x Cummins Ownership Percentage` 8. `Inventory Balance = (COGS / 365) x DIO` 9. `Free Cash Flow = Cash from Operations - Capital Expenditures - Capitalised Software Additions` 10. `Share Repurchases = (Operating Cash Flow x 50% Target Return Ratio) - Total Dividend Payments` ## Cross-Sheet Dependencies * The **Revenue & Segment Build** feeds the top line of the **Income Statement** and dictates the volume drivers for the **Working Capital** sheet. * The **Working Capital** sheet calculates changes in net working capital, which feeds directly into the **Cash Flow Statement**. * The **PP&E & Intangibles** sheet calculates depreciation and amortisation, feeding both the **Income Statement** (operating expenses) and the **Cash Flow Statement** (non-cash add-backs). * The **Debt Schedule** calculates interest expense, which feeds the **Income Statement**. This creates a circular reference if cash shortfalls are funded by the revolving credit facility, as interest expense lowers net income, which lowers cash flow, requiring more debt. A circuit breaker switch must be included. ## Sign Convention * **Revenue and Income:** Entered as positive numbers. * **Expenses and Outflows:** Entered as positive numbers in their specific schedules, but subtracted in the Income Statement and Cash Flow Statement formulas. * **Balance Sheet:** Assets are positive; Liabilities and Equity are positive. * **Cash Flow:** Sources of cash are positive; uses of cash (including capex and dividends) are negative. ## Things Most Likely to Go Wrong * **Atmus Separation Stub Period:** The model must account for the fact that Atmus Filtration Technologies was fully separated in March 2024. Historical financials prior to Q2 2024 include Atmus in the Components segment; forward projections must exclude it. * **Intersegment Eliminations:** Cummins has massive intersegment sales (e.g., Engine segment selling to Power Systems, Components selling to Engine). The model will overstate consolidated revenue if intersegment eliminations (historically 10% to 15% of gross segment sales) are not explicitly forecast and subtracted. * **Joint Venture Accounting:** Cummins generates significant income from unconsolidated JVs (especially Dongfeng and Chongqing in China). This is reported below operating income but is a critical source of cash. Do not confuse this with consolidated revenue. * **Accelera Restructuring:** The late 2025 electrolyser restructuring charges ($458 million) distort GAAP earnings. The model must separate these one-time items to calculate clean adjusted EBITDA. * **Tariff Impacts:** Management noted in early 2026 that tariffs diluted EBITDA margins by 50 basis points. The model needs a margin toggle to reflect ongoing trade policy volatility. * **Meritor Intangibles:** The 2022 acquisition created significant amortisation expense. Excluding this from adjusted EPS calculations is standard practice, but it must remain in the GAAP net income bridge. * **Warranty Accruals:** Cummins occasionally takes large warranty charges for legacy engine platforms. The model should hold warranty expense as a flat percentage of Engine revenue to avoid projecting unpredictable spikes. ## Validation Checks * "Consolidated EBITDA margin should be in the 15.0% to 18.0% range; flag if outside this band." * "Intersegment eliminations must be negative and equal approximately 12% to 14% of gross segment revenue." * "Capex as a percentage of revenue should run between 3.0% and 4.5%." * "Debt/EBITDA should remain below 2.0x to maintain the current credit rating profile." * "Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period." * "Free Cash Flow conversion (FCF / Net Income) should be between 80% and 110%." * "Dividend payout ratio should remain sustainable, typically consuming 25% to 35% of Net Income." ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | FY 2026 Revenue Growth | 5.5 | % | Midpoint of management's 3% to 8% guidance range for 2026. | | Engine Segment Margin | 14.0 | % | Historical average, reflecting stable pricing but flat volume growth. | | Distribution Segment Margin | 12.5 | % | Reflects strong pricing power and aftermarket resilience. | | Components Segment Margin | 14.2 | % | Post-Atmus separation baseline. | | Power Systems Margin | 18.0 | % | Elevated due to structural tailwinds in data centre power generation. | | Accelera Segment Margin | -50.0 | % | Segment remains in investment phase and operates at a significant loss. | | Gross Margin | 24.5 | % | 5-year historical average. | | SG&A as % of Revenue | 9.5 | % | Consistent with historical run-rate. | | R&D as % of Revenue | 4.0 | % | Elevated investment required for Destination Zero and HELM platforms. | | Effective Tax Rate | 22.0 | % | Standard corporate rate plus state and international blending. | | Days Sales Outstanding (DSO) | 55 | Days | Historical average. | | Days Inventory Outstanding (DIO) | 75 | Days | Historical average, reflecting complex global supply chain. | | Days Payable Outstanding (DPO) | 60 | Days | Historical average. | | Capex as % of Revenue | 3.5 | % | Management guidance for long-term capital intensity. | | Dividend per Share (FY 2026) | 8.00 | $ | Assumes continued progressive dividend growth from $7.64 in 2025. | | WACC | 8.5 | % | Reflects strong balance sheet but cyclical end-market exposure. | | Terminal Growth Rate | 2.0 | % | Standard industrial terminal growth assumption. | ## Data Sources & Benchmarks * **Filings:** SEC EDGAR (Form 10-K, 10-Q, 8-K) and the Cummins Investor Relations website (investor.cummins.com). * **Key Peers:** PACCAR (PCAR), Caterpillar (CAT), Deere & Company (DE), Allison Transmission (ALSN). * **Industry Data:** ACT Research (for North American Class 8 truck build rates and orders), WardsAuto. * **Consensus Estimates:** FactSet or Bloomberg for forward-looking EPS and revenue consensus. ## Sources * Cummins Inc. 2024 Annual Report and Form 10-K (https://www.cummins.com) * Cummins Q4 2025 Earnings Release and Call Transcript (February 5, 2026) * Cummins Investor Relations: Segment Revenue Breakdown (https://www.cummins.com) * Atmus Filtration Technologies Separation Press Releases (March 2024) * Meritor Acquisition Press Releases and Integration Updates (August 2022) --- ## Frequently asked questions ### What does Cummins Inc. (CMI) do? Cummins Inc. designs, manufactures, distributes, and services a wide range of power solutions, including advanced diesel and natural gas engines, as well as electric and hybrid powertrains. The company is a key supplier to global commercial vehicle, mining, marine, and power generation industries. ### How does Cummins generate revenue across its business segments? Cummins generates revenue from its Distribution segment through aftermarket support and parts, driven by the global vehicle fleet's aging. The Engine segment's revenue is cyclical, tied to unit sales of heavy-duty, medium-duty, and off-highway engines, while the Components segment contributes through axles, drivelines, and emission solutions. ### What is Cummins' typical capital expenditure as a percentage of revenue? Cummins typically allocates 3.0% to 4.5% of its revenue to capital expenditures, amounting to approximately $1.0 billion to $1.4 billion annually. About 60% of this spending is for maintenance and tooling, while 40% is directed towards growth initiatives like Accelera and new engine platforms. ### What is the assumed revenue growth rate for Cummins in the financial model? The financial model for Cummins assumes a revenue growth rate of approximately 9.64%. This projection helps analysts assess the company's future performance, considering strategies like "Destination Zero" and the integration of the Meritor acquisition. ### What is the primary purpose of the downloadable Cummins financial model? The downloadable financial model serves as a comprehensive equity valuation and scenario planning tool for Cummins Inc. It allows analysts to evaluate the cash flow impact of the company's "Destination Zero" strategy, the Meritor acquisition, and the Atmus Filtration Technologies separation. ### Can I download an Excel financial model for Cummins (CMI) and what forecast horizon does it cover? Yes, an Excel financial model for Cummins (CMI) is available for download. This model provides a forecast horizon spanning from fiscal year 2026 through fiscal year 2030, enabling detailed future financial analysis. [Interactive forecast calculator](https://finamodel.com/companies/cummins/forecast)