Cummins Inc. (NYSE:CMI)

Debt to Equity

The debt to equity ratio shows a general increasing trend from 0.32 in 2019 to a peak of 0.88 in 2022, followed by a decline to 0.76 in 2023. This indicates a growing reliance on debt relative to equity until 2022, with some reduction in debt proportion relative to equity observed in the most recent year.

Debt to Equity (Including Operating Lease Liability)

The values follow a similar pattern as the standard debt to equity ratio but are consistently higher. The ratio rose from 0.38 in 2019 to 0.93 in 2022, then decreased to 0.81 in 2023. This suggests that operating lease liabilities contribute notably to the overall financial leverage but also experienced a slight easing in the latest period.

Debt to Capital

There is an upward trend in the debt to capital ratio from 0.24 in 2019 to a peak of 0.47 in 2022, with a slight decline to 0.43 in 2023. This pattern reflects increased leverage within the company’s capital structure over the period, with some mitigation in the last year.

Debt to Capital (Including Operating Lease Liability)

The ratio including operating lease liability follows a comparable trajectory, increasing from 0.28 in 2019 to 0.48 in 2022 and reducing marginally to 0.45 in 2023. This highlights the additional impact of lease obligations on the overall capital leverage.

Debt to Assets

The debt to assets ratio rises from 0.12 in 2019 to 0.26 in 2022 before decreasing to 0.21 in 2023. The trend suggests a growing proportion of debt financing against total assets during the first four years, with some reduction in the most recent year.

Debt to Assets (Including Operating Lease Liability)

This measure mirrors the debt to assets trend but consistently shows higher values due to inclusion of operating lease liabilities, increasing from 0.15 in 2019 to 0.28 in 2022 and then declining to 0.23 in 2023.

Financial Leverage

Financial leverage steadily increased over the entire period, starting at 2.63 in 2019 and rising each year to reach 3.62 in 2023. This indicates a growing use of debt relative to equity financing, placing the company in a more leveraged position by the end of the period under review.

Interest Coverage

Interest coverage demonstrates a significant downward trend, dropping from 27 in 2019 to 5.34 in 2023. This sharp decline suggests a deteriorating ability to cover interest expenses from operating earnings, raising concerns about financial risk and interest payment capacity.

Fixed Charge Coverage

Fixed charge coverage also shows a decreasing pattern, falling from 9.94 in 2019 to 4.01 in 2023, with a less steep decrease compared to interest coverage. This decline indicates reduced ability to meet fixed financial obligations, underscoring potential pressure on the company's cash flows for meeting fixed charges.

Total Debt

The total debt shows a clear upward trend from 2019 to 2022, increasing significantly from $2,367 million in 2019 to a peak of $7,855 million in 2022. This represents more than a threefold increase over the four-year period. However, in 2023, total debt decreased substantially to $6,696 million, indicating a possible effort to reduce leverage or refinance liabilities.

Total Shareholders’ Equity

Shareholders' equity also increased consistently over the years, rising from $7,507 million in 2019 to $8,975 million in 2022. Although it slightly declined to $8,850 million in 2023, the overall trajectory suggests steady growth in the company’s equity base during the period analyzed.

Debt to Equity Ratio

The debt to equity ratio follows a pattern consistent with the movements in total debt and equity. It increased from 0.32 in 2019 to a high of 0.88 in 2022, reflecting the substantial rise in debt relative to equity during these years. In 2023, the ratio decreased to 0.76, aligning with the reduction in total debt and the slight dip in equity. Despite this reduction, the ratio remains elevated compared to earlier years, indicating a higher leverage position than at the beginning of the period.

Total Debt (including operating lease liability)

The total debt showed a significant increase from 2019 to 2020, rising from $2,868 million to $4,617 million. This level remained relatively stable in 2021 with a minor decrease to $4,613 million. However, there was a sharp increase in 2022, reaching a peak of $8,355 million, before declining to $7,208 million in 2023. The trend indicates considerable volatility in debt levels, with a substantial buildup in 2022 followed by a partial reduction in the subsequent year.

Total Shareholders’ Equity

Shareholders' equity exhibited a steady upward trajectory throughout the period. Beginning at $7,507 million in 2019, equity increased consistently each year to reach $8,850 million by the end of 2023. This steady growth reflects a strengthening equity base despite fluctuations in debt levels.

Debt to Equity Ratio

The debt to equity ratio followed a similar pattern to total debt, beginning at 0.38 in 2019 and rising to 0.57 in 2020. It slightly decreased to 0.54 in 2021 before climbing sharply to 0.93 in 2022, coinciding with the peak in total debt. In 2023, the ratio declined to 0.81, indicating some deleveraging but remaining elevated compared to the early years. Overall, the ratio indicates increased leverage over time, with a notable spike in 2022.

Summary of Trends

There is a clear pattern of increasing debt levels punctuated by a significant surge in 2022, which significantly impacted the leverage ratio. Shareholders' equity, by contrast, has grown steadily, enhancing the company’s capital base. The elevated debt to equity ratio in 2022 suggests increased financial risk during that period, though subsequent debt reduction improved the leverage position in 2023. The data depicts a company balancing growth in equity with fluctuating, yet generally rising, debt obligations.

The financial data reveals trends in the total debt, total capital, and the debt to capital ratio over a five-year period from 2019 to 2023.

Total Debt

The total debt demonstrates a significant upward trend from 2019 to 2022. It increased from $2,367 million in 2019 to $7,855 million in 2022, more than tripling over the period. In 2023, the total debt decreased to $6,696 million but remained substantially higher compared to the initial 2019 figure.

Total Capital

Total capital also shows an increasing trend, but at a more moderate pace compared to total debt. It rose from $9,874 million in 2019 to a peak of $16,830 million in 2022, followed by a slight decline to $15,546 million in 2023. Overall, total capital increased by approximately 57% over the five years.

Debt to Capital Ratio

The debt to capital ratio reflects leverage trends and moved upward from 0.24 in 2019 to 0.47 in 2022, indicating a growing proportion of debt financing relative to total capital. In 2023, the ratio decreased slightly to 0.43 but remained elevated compared to the beginning of the period. This pattern suggests increased reliance on debt funding, with a slight effort to reduce leverage in the most recent year.

In summary, the financial data indicates that the organization has increased its total debt substantially over the observed period, outpacing the growth in total capital and resulting in a higher leverage position. The slight reduction in debt and debt to capital ratio in 2023 may indicate a strategic move towards lowering leverage after a period of amplified borrowing.

Total Debt (including operating lease liability)

The total debt exhibited a notable increase over the analyzed period, rising from 2,868 million USD at the end of 2019 to a peak of 8,355 million USD at the end of 2022. It then declined to 7,208 million USD by the end of 2023. This demonstrates a significant leveraging phase followed by a moderate deleveraging.

Total Capital (including operating lease liability)

Total capital also showed a rising trend from 10,375 million USD at the end of 2019 to 17,330 million USD at the end of 2022. However, in 2023, total capital declined to 16,058 million USD, indicating a reduction after strong growth during the prior years.

Debt to Capital Ratio (including operating lease liability)

The debt to capital ratio increased from 0.28 in 2019 to 0.48 in 2022, reflecting that debt grew at a faster pace relative to total capital. There was a slight reduction to 0.45 in 2023, suggesting a small improvement in the capital structure or a reduction in relative leverage.

Total Debt

The total debt exhibited a significant increase from 2019 to 2020, jumping from 2,367 million US dollars to 4,164 million US dollars. This elevated level of debt remained relatively stable in 2021 at 4,159 million US dollars before increasing sharply in 2022 to 7,855 million US dollars. In 2023, the total debt decreased to 6,696 million US dollars, indicating a partial reduction from the previous year but still substantially higher than the levels in 2019 through 2021.

Total Assets

Total assets showed a consistent upward trajectory over the five-year period. Starting at 19,737 million US dollars in 2019, there was steady growth each year, reaching 22,624 million in 2020, 23,710 million in 2021, and then a more pronounced rise in 2022 to 30,299 million US dollars. The upward trend continued into 2023, with total assets increasing further to 32,005 million US dollars.

Debt to Assets Ratio

The debt to assets ratio reflects the relationship between the company's debt levels and its asset base. This ratio was relatively low in 2019 at 0.12, increased to 0.18 in 2020 and remained stable at this level in 2021. There was a notable increase in 2022 to 0.26, indicating a higher leverage position. However, in 2023, the ratio decreased to 0.21, signaling some deleveraging or asset growth outpacing debt increase.

Overall Analysis

Over the observed period, the company’s total assets consistently grew, illustrating expansion or asset accumulation strategies. Total debt saw a marked rise primarily in 2020 and more sharply in 2022, with a slight reduction in 2023. Correspondingly, the debt to assets ratio increased, particularly in 2022, suggesting increased financial leverage, although the ratio settled somewhat lower in 2023. The data indicates a strategic increase in leverage to support asset growth, followed by a period of partial debt reduction or asset strengthening to improve the capital structure.

The financial data presents key balance sheet metrics over a five-year period. A review of the trends regarding total debt, total assets, and the debt to assets ratio reveals significant changes impacting the financial structure.

Total Debt (including operating lease liability)

The total debt increased markedly from 2,868 million USD in 2019 to a peak of 8,355 million USD in 2022. This represents nearly a threefold increase over three years. In 2023, total debt declined to 7,208 million USD but remained substantially elevated compared to the 2019 figure. This sharp rise followed by a slight reduction suggests episodes of increased borrowing or lease commitments, possibly to fund expansion or operations, with some deleveraging occurring in the latest year.

Total Assets

Total assets exhibited an upward trajectory throughout the period, growing from 19,737 million USD in 2019 to 32,005 million USD by 2023. The growth rate accelerated notably from 2021 to 2022, with an increase of approximately 7,589 million USD, and asset levels remained elevated in 2023. The consistent increase in assets indicates investments or acquisitions expanding the company's asset base, enhancing its scale and possibly capacity.

Debt to Assets Ratio (including operating lease liability)

The debt to assets ratio rose from 0.15 in 2019 to a high of 0.28 in 2022, reflecting the increased leverage during the period of rising total debt and asset growth. In 2023, the ratio decreased to 0.23, indicating some reduction in leverage but still above the initial level in 2019. This fluctuation in leverage suggests a strategic adjustment in capital structure, balancing between debt usage and asset accumulation.

Overall, the data indicate a period of significant expansion financed in part by increased debt levels, with an effort to moderate leverage in the most recent year. The simultaneous growth in total assets supports the interpretation of an investment phase, potentially positioning the company for future growth while managing risk through partial deleveraging.

The financial data reveals several notable trends in the company's asset base, shareholders' equity, and financial leverage over the five-year period ending in 2023.

Total Assets

The total assets consistently increased from US$19,737 million in 2019 to US$32,005 million in 2023. This growth reflects a significant expansion in the company's asset base, with a particularly sharp rise observed between 2021 and 2022.

Total Shareholders’ Equity

The shareholders’ equity increased steadily from US$7,507 million in 2019 to US$8,850 million in 2023. Although the equity base grew over this period, the rate of increase was more moderate compared to the growth observed in total assets, with a slight decrease noted between 2022 and 2023.

Financial Leverage

The financial leverage ratio showed an upward trend, rising from 2.63 in 2019 to 3.62 in 2023. This indicates a growing reliance on debt financing relative to equity. The most significant increase occurred post-2021, aligning with the heightened growth in total assets and the relatively slower increase in shareholders’ equity.

Overall, the company has expanded its asset base substantially while maintaining a steady, though more moderate, growth in equity. However, the rising financial leverage suggests an increased use of debt over the period, which may imply higher financial risk. Monitoring the balance between debt and equity will be important to assess the sustainability of this growth trend and the company's financial stability going forward.

Earnings before interest and tax (EBIT)

The EBIT showed a fluctuating trend over the five-year period. It declined from 2943 million USD in 2019 to 2438 million USD in 2020, indicating a reduction in operating profitability. Subsequently, EBIT increased to 2862 million USD in 2021 and further to 3018 million USD in 2022, showing a recovery and growth in earnings from core operations. However, a significant decline occurred in 2023, where EBIT dropped sharply to 2001 million USD, reflecting a notable downturn in operating performance.

Interest Expense

Interest expense remained relatively stable around 100 to 111 million USD from 2019 through 2021. In 2022, it nearly doubled to 199 million USD and then increased further to 375 million USD in 2023. This substantial rise suggests an increased debt burden or higher borrowing costs in the latter years, which could be impacting the company's financial expenses significantly.

Interest Coverage Ratio

The interest coverage ratio measures the ability to meet interest payments from operating earnings. It declined steadily from a high level of 27 in 2019 to 24.38 in 2020 and 25.78 in 2021, maintaining relatively strong coverage. However, there was a marked decrease in 2022 to 15.17, followed by a further sharp drop to 5.34 in 2023. This declining trend correlates with rising interest expenses and falling EBIT in 2023, indicating progressively strained capacity to cover interest obligations, which could raise concerns over financial risk and solvency.

Earnings before fixed charges and tax

The earnings before fixed charges and tax show a fluctuating trend over the five-year period. The value decreased from 3151 million US$ in 2019 to 2610 million US$ in 2020, reflecting a notable decline. Thereafter, there was a recovery with an increase to 3034 million US$ in 2021 and a further rise to 3178 million US$ in 2022. However, in 2023, the earnings saw a sharp decline to 2166 million US$, the lowest level in the period analyzed.

Fixed charges

Fixed charges demonstrated a consistent upward trend from 2019 to 2023. Starting at 317 million US$ in 2019, fixed charges gradually increased to 272 million US$ in 2020 and 283 million US$ in 2021, followed by a sharper rise to 359 million US$ in 2022. The most significant increase occurred in 2023, where fixed charges reached 540 million US$, indicating a substantial rise in the company's fixed financial obligations.

Fixed charge coverage

The fixed charge coverage ratio exhibited variability with a declining tendency, especially in recent years. Initially, it was strong at 9.94 in 2019 and remained relatively stable at 9.6 in 2020. The ratio improved to its peak at 10.72 in 2021 but then fell to 8.85 in 2022. The most notable change occurred in 2023 when the ratio sharply declined to 4.01, signaling a significant reduction in the company's ability to cover its fixed charges with its earnings before fixed charges and tax.