Stock Analysis on Net
Stock Analysis on Net

Cummins Inc. (NYSE:CMI)

Analysis of Income Taxes

Microsoft Excel

Income Tax Expense (Benefit)

Cummins Inc., income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel
12 months ended: Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
U.S. federal and state 611 425 261 162 288
Foreign 632 485 319 358 282
Current income tax expense 1,243 910 580 520 570
U.S. federal and state (468) (229) (12) 2 (32)
Foreign 11 (45) 19 22 28
Impact of India tax law changes — — — (17) —
Deferred income tax expense (benefit) (457) (274) 7 7 (4)
Income tax expense 786 636 587 527 566

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Item Description The company
Current income tax expense Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. Cummins Inc. current income tax expense increased from 2021 to 2022 and from 2022 to 2023.
Deferred income tax expense (benefit) Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. Cummins Inc. deferred income tax expense (benefit) decreased from 2021 to 2022 and from 2022 to 2023.
Income tax expense Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Cummins Inc. income tax expense increased from 2021 to 2022 and from 2022 to 2023.

Effective Income Tax Rate (EITR)

Cummins Inc., effective income tax rate (EITR) reconciliation

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Statutory U.S. federal income tax rate 21.00% 21.00% 21.00% 21.00% 21.00%
State income tax, net of federal effect -0.40% 1.30% 1.10% 1.00% 1.10%
Differences in rates and taxability of foreign subsidiaries and joint ventures 11.90% 3.10% 0.10% 3.60% 1.50%
Research tax credits -4.70% -1.80% -0.60% -1.30% -1.50%
Foreign derived intangible income -4.20% -2.00% -1.00% -1.20% -1.30%
Agreement in Principle, federal impact 22.40% 0.00% 0.00% 0.00% 0.00%
Agreement in Principle, state impact 2.10% 0.00% 0.00% 0.00% 0.00%
Impact of India tax law changes 0.00% 0.00% 0.00% -0.70% 0.00%
Other, net 0.20% 1.00% 0.70% 0.10% -0.80%
Effective tax rate 48.30% 22.60% 21.30% 22.50% 20.00%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Item Description The company
Effective tax rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. Cummins Inc. effective tax rate increased from 2021 to 2022 and from 2022 to 2023.

Components of Deferred Tax Assets and Liabilities

Cummins Inc., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
U.S. and state carryforward benefits 272 272 218 223 207
Foreign carryforward benefits 609 527 177 159 157
Employee benefit plans 347 258 254 273 279
Warranty expenses 483 458 445 445 427
Lease liabilities 125 110 108 107 122
Capitalized research and development expenditures 591 238 — — —
Accrued expenses 253 174 111 93 76
Other 78 126 78 52 44
Gross deferred tax assets 2,758 2,163 1,391 1,352 1,312
Valuation allowance (789) (704) (360) (346) (317)
Deferred tax assets 1,969 1,459 1,031 1,006 995
Property, plant and equipment (367) (369) (272) (258) (260)
Unremitted income of foreign subsidiaries and joint ventures (179) (210) (197) (185) (181)
Employee benefit plans (278) (311) (355) (229) (222)
Lease assets (123) (108) (105) (103) (120)
Intangible assets (406) (435) — — —
Other (64) (50) (77) (77) (77)
Deferred tax liabilities (1,417) (1,483) (1,006) (852) (860)
Net deferred tax assets (liabilities) 552 (24) 25 154 135

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Item Description The company
Gross deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Cummins Inc. gross deferred tax assets increased from 2021 to 2022 and from 2022 to 2023.
Deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. Cummins Inc. deferred tax assets increased from 2021 to 2022 and from 2022 to 2023.
Net deferred tax assets (liabilities) Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. Cummins Inc. net deferred tax assets (liabilities) decreased from 2021 to 2022 but then increased from 2022 to 2023 exceeding 2021 level.

Deferred Tax Assets and Liabilities, Classification

Cummins Inc., deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Deferred income tax assets 1,082 625 428 479 441
Deferred income tax liabilities 530 649 403 325 306

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Item Description The company
Deferred income tax assets Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. Cummins Inc. deferred income tax assets increased from 2021 to 2022 and from 2022 to 2023.
Deferred income tax liabilities Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. Cummins Inc. deferred income tax liabilities increased from 2021 to 2022 but then slightly decreased from 2022 to 2023.

Adjustments to Financial Statements: Removal of Deferred Taxes

Cummins Inc., adjustments to financial statements

US$ in millions

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Adjustment to Total Assets
Total assets (as reported) 32,005 30,299 23,710 22,624 19,737
Less: Noncurrent deferred tax assets, net 1,082 625 428 479 441
Total assets (adjusted) 30,923 29,674 23,282 22,145 19,296
Adjustment to Total Liabilities
Total liabilities (as reported) 22,101 20,074 14,309 13,635 11,272
Less: Noncurrent deferred tax liabilities, net 530 649 403 325 306
Total liabilities (adjusted) 21,571 19,425 13,906 13,310 10,966
Adjustment to Total Cummins Inc. Shareholders’ Equity
Total Cummins Inc. shareholders’ equity (as reported) 8,850 8,975 8,474 8,062 7,507
Less: Net deferred tax assets (liabilities) 552 (24) 25 154 135
Total Cummins Inc. shareholders’ equity (adjusted) 8,298 8,999 8,449 7,908 7,372
Adjustment to Net Income Attributable To Cummins Inc.
Net income attributable to Cummins Inc. (as reported) 735 2,151 2,131 1,789 2,260
Add: Deferred income tax expense (benefit) (457) (274) 7 7 (4)
Net income attributable to Cummins Inc. (adjusted) 278 1,877 2,138 1,796 2,256

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Cummins Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

Cummins Inc., adjusted financial ratios

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Net Profit Margin
Reported net profit margin 2.16% 7.66% 8.87% 9.03% 9.59%
Adjusted net profit margin 0.82% 6.69% 8.90% 9.07% 9.57%
Total Asset Turnover
Reported total asset turnover 1.06 0.93 1.01 0.88 1.19
Adjusted total asset turnover 1.10 0.95 1.03 0.89 1.22
Financial Leverage
Reported financial leverage 3.62 3.38 2.80 2.81 2.63
Adjusted financial leverage 3.73 3.30 2.76 2.80 2.62
Return on Equity (ROE)
Reported ROE 8.31% 23.97% 25.15% 22.19% 30.11%
Adjusted ROE 3.35% 20.86% 25.30% 22.71% 30.60%
Return on Assets (ROA)
Reported ROA 2.30% 7.10% 8.99% 7.91% 11.45%
Adjusted ROA 0.90% 6.33% 9.18% 8.11% 11.69%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Cummins Inc. adjusted net profit margin ratio deteriorated from 2021 to 2022 and from 2022 to 2023.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Cummins Inc. adjusted total asset turnover ratio deteriorated from 2021 to 2022 but then improved from 2022 to 2023 exceeding 2021 level.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 Cummins Inc. adjusted financial leverage ratio increased from 2021 to 2022 and from 2022 to 2023.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Cummins Inc. adjusted ROE deteriorated from 2021 to 2022 and from 2022 to 2023.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Cummins Inc. adjusted ROA deteriorated from 2021 to 2022 and from 2022 to 2023.

Cummins Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Net Profit Margin

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Cummins Inc. 735 2,151 2,131 1,789 2,260
Net sales 34,065 28,074 24,021 19,811 23,571
Profitability Ratio
Net profit margin1 2.16% 7.66% 8.87% 9.03% 9.59%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Cummins Inc. 278 1,877 2,138 1,796 2,256
Net sales 34,065 28,074 24,021 19,811 23,571
Profitability Ratio
Adjusted net profit margin2 0.82% 6.69% 8.90% 9.07% 9.57%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Net profit margin = 100 × Net income attributable to Cummins Inc. ÷ Net sales
= 100 × 735 ÷ 34,065 = 2.16%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to Cummins Inc. ÷ Net sales
= 100 × 278 ÷ 34,065 = 0.82%

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. Cummins Inc. adjusted net profit margin ratio deteriorated from 2021 to 2022 and from 2022 to 2023.

Adjusted Total Asset Turnover

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Net sales 34,065 28,074 24,021 19,811 23,571
Total assets 32,005 30,299 23,710 22,624 19,737
Activity Ratio
Total asset turnover1 1.06 0.93 1.01 0.88 1.19
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net sales 34,065 28,074 24,021 19,811 23,571
Adjusted total assets 30,923 29,674 23,282 22,145 19,296
Activity Ratio
Adjusted total asset turnover2 1.10 0.95 1.03 0.89 1.22

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= 34,065 ÷ 32,005 = 1.06

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 34,065 ÷ 30,923 = 1.10

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Cummins Inc. adjusted total asset turnover ratio deteriorated from 2021 to 2022 but then improved from 2022 to 2023 exceeding 2021 level.

Adjusted Financial Leverage

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Total assets 32,005 30,299 23,710 22,624 19,737
Total Cummins Inc. shareholders’ equity 8,850 8,975 8,474 8,062 7,507
Solvency Ratio
Financial leverage1 3.62 3.38 2.80 2.81 2.63
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets 30,923 29,674 23,282 22,145 19,296
Adjusted total Cummins Inc. shareholders’ equity 8,298 8,999 8,449 7,908 7,372
Solvency Ratio
Adjusted financial leverage2 3.73 3.30 2.76 2.80 2.62

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 Financial leverage = Total assets ÷ Total Cummins Inc. shareholders’ equity
= 32,005 ÷ 8,850 = 3.62

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Cummins Inc. shareholders’ equity
= 30,923 ÷ 8,298 = 3.73

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 Cummins Inc. adjusted financial leverage ratio increased from 2021 to 2022 and from 2022 to 2023.

Adjusted Return on Equity (ROE)

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Cummins Inc. 735 2,151 2,131 1,789 2,260
Total Cummins Inc. shareholders’ equity 8,850 8,975 8,474 8,062 7,507
Profitability Ratio
ROE1 8.31% 23.97% 25.15% 22.19% 30.11%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Cummins Inc. 278 1,877 2,138 1,796 2,256
Adjusted total Cummins Inc. shareholders’ equity 8,298 8,999 8,449 7,908 7,372
Profitability Ratio
Adjusted ROE2 3.35% 20.86% 25.30% 22.71% 30.60%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 ROE = 100 × Net income attributable to Cummins Inc. ÷ Total Cummins Inc. shareholders’ equity
= 100 × 735 ÷ 8,850 = 8.31%

2 Adjusted ROE = 100 × Adjusted net income attributable to Cummins Inc. ÷ Adjusted total Cummins Inc. shareholders’ equity
= 100 × 278 ÷ 8,298 = 3.35%

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Cummins Inc. adjusted ROE deteriorated from 2021 to 2022 and from 2022 to 2023.

Adjusted Return on Assets (ROA)

Microsoft Excel
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Cummins Inc. 735 2,151 2,131 1,789 2,260
Total assets 32,005 30,299 23,710 22,624 19,737
Profitability Ratio
ROA1 2.30% 7.10% 8.99% 7.91% 11.45%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Cummins Inc. 278 1,877 2,138 1,796 2,256
Adjusted total assets 30,923 29,674 23,282 22,145 19,296
Profitability Ratio
Adjusted ROA2 0.90% 6.33% 9.18% 8.11% 11.69%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

1 ROA = 100 × Net income attributable to Cummins Inc. ÷ Total assets
= 100 × 735 ÷ 32,005 = 2.30%

2 Adjusted ROA = 100 × Adjusted net income attributable to Cummins Inc. ÷ Adjusted total assets
= 100 × 278 ÷ 30,923 = 0.90%

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Cummins Inc. adjusted ROA deteriorated from 2021 to 2022 and from 2022 to 2023.