Analysis of Solvency Ratios
Quarterly Data
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Cummins Inc., solvency ratios (quarterly data)
Based on: 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29).
The analysis of the financial ratios over the examined periods reveals several notable trends and developments in the company's financial structure and risk profile.
- Debt to Equity Ratio
- This ratio remained relatively stable between 0.47 and 0.53 from early 2020 through mid-2022, indicating a consistent balance between debt and shareholders' equity. However, starting in September 2022, the ratio increased sharply to 0.97, reflecting a significant rise in leverage. Subsequently, a steady decline is observed, reducing the ratio to 0.75 by March 2024, signaling a reduction in reliance on debt relative to equity after the peak.
- Debt to Capital Ratio
- The debt to capital ratio followed a similar pattern to the debt to equity ratio. It was stable around 0.32 to 0.35 up to mid-2022. Beginning in September 2022, there was a marked increase peaking at 0.49, followed by a gradual decline to 0.43 by March 2024. This indicates an increased proportion of debt in the company's overall capital structure during the later part of 2022, with subsequent efforts to decrease this proportion.
- Debt to Assets Ratio
- This ratio shows a stable trend around 0.17 to 0.19 until mid-2022, after which there is a sharp elevation to 0.27 in September 2022. Post this peak, a downward trend ensues, reaching 0.21 by March 2024. The increase in this ratio suggests higher debt levels relative to the firm's assets in late 2022, with a partial reversal in the following periods.
- Financial Leverage
- Financial leverage ratios were consistent around 2.8 until mid-2022. A significant spike occurs in September 2022, rising to 3.55, the highest value observed, followed by some fluctuation but remaining elevated, with values above 3.0 through March 2024 and peaking again at 3.62 in December 2023. This pattern indicates an increase in reliance on borrowed funds to finance assets, reflecting higher financial risk during this period.
- Interest Coverage Ratio
- The interest coverage ratio declined notably over the period analyzed. It started at a very strong level (above 23) from early 2020 through mid-2022, demonstrating a robust ability to meet interest obligations. A sharp decline began in late 2022, dropping to 19.51, and continued falling to a low of 5.34 in December 2023, before slightly improving to 8.47 by March 2024. This decreasing trend highlights a diminishing capacity to cover interest expenses from operating earnings, which may signal increased financial stress or reduced earnings relative to debt servicing costs.
Overall, the data suggest that the company experienced a period of increased leverage starting in the second half of 2022, with higher debt ratios and financial leverage. Despite subsequent attempts to reduce leverage, the levels remain elevated compared to prior periods. Concurrently, the marked reduction in interest coverage ratio raises concerns about the company's ability to service its debt comfortably, indicating increased financial risk during the most recent quarters analyzed.
Debt Ratios
Coverage Ratios
Debt to Equity
Cummins Inc., debt to equity calculation (quarterly data)
| Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Oct 3, 2021 | Jul 4, 2021 | Apr 4, 2021 | Dec 31, 2020 | Sep 27, 2020 | Jun 28, 2020 | Mar 29, 2020 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Loans payable | 342) | 280) | 231) | 419) | 229) | 210) | 217) | 165) | 243) | 208) | 85) | 54) | 93) | 169) | 129) | 109) | 121) | ||||||
| Commercial paper | 609) | 1,496) | 1,710) | 1,617) | 2,545) | 2,574) | 2,393) | 705) | 311) | 313) | 200) | 200) | 317) | 323) | 316) | 2,027) | 1,617) | ||||||
| Current maturities of long-term debt | 113) | 118) | 573) | 575) | 569) | 573) | 55) | 65) | 69) | 59) | 55) | 57) | 61) | 62) | 58) | 66) | 33) | ||||||
| Long-term debt | 5,771) | 4,802) | 4,950) | 5,089) | 4,409) | 4,498) | 5,450) | 3,490) | 3,502) | 3,579) | 3,602) | 3,620) | 3,620) | 3,610) | 3,609) | 1,639) | 1,580) | ||||||
| Total debt | 6,835) | 6,696) | 7,464) | 7,700) | 7,752) | 7,855) | 8,115) | 4,425) | 4,125) | 4,159) | 3,942) | 3,931) | 4,091) | 4,164) | 4,112) | 3,841) | 3,351) | ||||||
| Total Cummins Inc. shareholders’ equity | 9,067) | 8,850) | 10,658) | 10,337) | 9,623) | 8,975) | 8,380) | 8,738) | 8,436) | 8,474) | 8,082) | 7,866) | 8,109) | 8,062) | 7,700) | 7,192) | 7,068) | ||||||
| Solvency Ratio | |||||||||||||||||||||||
| Debt to equity1 | 0.75 | 0.76 | 0.70 | 0.74 | 0.81 | 0.88 | 0.97 | 0.51 | 0.49 | 0.49 | 0.49 | 0.50 | 0.50 | 0.52 | 0.53 | 0.53 | 0.47 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Debt to Equity, Competitors2 | |||||||||||||||||||||||
| Boeing Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Caterpillar Inc. | 2.15 | 1.94 | 1.81 | 2.07 | 2.04 | 2.33 | 2.34 | 2.35 | 2.20 | 2.29 | 2.21 | 2.23 | 2.30 | — | — | — | — | ||||||
| Eaton Corp. plc | 0.48 | 0.49 | 0.50 | 0.52 | 0.50 | 0.51 | 0.56 | 0.59 | 0.58 | 0.52 | 0.57 | 0.79 | 0.68 | — | — | — | — | ||||||
| GE Aerospace | 0.69 | 0.77 | 0.73 | 0.70 | 0.71 | 0.89 | 0.97 | 0.94 | 0.86 | 0.87 | 1.68 | 1.90 | 2.12 | — | — | — | — | ||||||
| Honeywell International Inc. | 1.53 | 1.29 | 1.18 | 1.24 | 1.13 | 1.17 | 0.96 | 1.09 | 1.05 | 1.06 | 1.19 | 1.19 | 1.19 | — | — | — | — | ||||||
| Lockheed Martin Corp. | 2.92 | 2.55 | 1.88 | 1.90 | 1.62 | 1.68 | 0.96 | 1.02 | 1.16 | 1.07 | 1.21 | 1.87 | 1.93 | — | — | — | — | ||||||
| RTX Corp. | 0.71 | 0.73 | 0.51 | 0.49 | 0.47 | 0.44 | 0.48 | 0.45 | 0.43 | 0.43 | 0.44 | 0.44 | 0.44 | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29).
1 Q1 2024 Calculation
Debt to equity = Total debt ÷ Total Cummins Inc. shareholders’ equity
= 6,835 ÷ 9,067 = 0.75
2 Click competitor name to see calculations.
- Total Debt
- The total debt of the company shows an overall increasing trend from March 2020 through the end of 2022, rising from approximately 3.35 billion USD to over 8.1 billion USD by September 2022. This marked increase indicates significant additional borrowing or liabilities incurred during this period. Subsequent quarters show a declining trend in total debt, decreasing to about 6.7 billion USD by March 2024, suggesting a period of deleveraging or repayment.
- Total Shareholders’ Equity
- Shareholders’ equity has demonstrated steady growth from early 2020 through the third quarter of 2023, increasing from roughly 7.1 billion USD to a peak near 10.7 billion USD. However, a notable drop occurs in the last reported quarter, falling to approximately 8.9 billion USD by December 2023 before a slight rebound to around 9.1 billion USD in March 2024. This downward adjustment may indicate changes in equity valuation, dividend payments, or other equity-related activities impacting the net worth.
- Debt to Equity Ratio
- The debt to equity ratio remained relatively stable and moderate from March 2020 until mid-2022, staying around 0.47 to 0.53, which suggests a balanced approach to leverage. A sharp increase occurred starting in September 2022, where the ratio nearly doubled to 0.97, reflecting the significant rise in debt relative to equity at that time. Following this peak, the ratio trends downward gradually, settling around 0.75 by March 2024. This trend corresponds with the reductions in total debt and fluctuations in equity levels, indicating an improving leverage position but still above earlier, more conservative levels.
- Summary Insights
- The company experienced substantial debt accumulation through mid-2022, followed by active debt reduction efforts through to early 2024. Shareholders’ equity grew prominently until late 2023 before a decline, signaling some volatility or strategic actions affecting equity. The debt to equity ratio's peak in late 2022 indicates a period of elevated leverage risk, but subsequent reductions suggest active management of the capital structure towards a more balanced financial posture. Overall, financial leverage increased sharply during the pandemic recovery phase, then stabilized with slight improvement in the most recent periods.
Debt to Capital
Cummins Inc., debt to capital calculation (quarterly data)
| Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Oct 3, 2021 | Jul 4, 2021 | Apr 4, 2021 | Dec 31, 2020 | Sep 27, 2020 | Jun 28, 2020 | Mar 29, 2020 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Loans payable | 342) | 280) | 231) | 419) | 229) | 210) | 217) | 165) | 243) | 208) | 85) | 54) | 93) | 169) | 129) | 109) | 121) | ||||||
| Commercial paper | 609) | 1,496) | 1,710) | 1,617) | 2,545) | 2,574) | 2,393) | 705) | 311) | 313) | 200) | 200) | 317) | 323) | 316) | 2,027) | 1,617) | ||||||
| Current maturities of long-term debt | 113) | 118) | 573) | 575) | 569) | 573) | 55) | 65) | 69) | 59) | 55) | 57) | 61) | 62) | 58) | 66) | 33) | ||||||
| Long-term debt | 5,771) | 4,802) | 4,950) | 5,089) | 4,409) | 4,498) | 5,450) | 3,490) | 3,502) | 3,579) | 3,602) | 3,620) | 3,620) | 3,610) | 3,609) | 1,639) | 1,580) | ||||||
| Total debt | 6,835) | 6,696) | 7,464) | 7,700) | 7,752) | 7,855) | 8,115) | 4,425) | 4,125) | 4,159) | 3,942) | 3,931) | 4,091) | 4,164) | 4,112) | 3,841) | 3,351) | ||||||
| Total Cummins Inc. shareholders’ equity | 9,067) | 8,850) | 10,658) | 10,337) | 9,623) | 8,975) | 8,380) | 8,738) | 8,436) | 8,474) | 8,082) | 7,866) | 8,109) | 8,062) | 7,700) | 7,192) | 7,068) | ||||||
| Total capital | 15,902) | 15,546) | 18,122) | 18,037) | 17,375) | 16,830) | 16,495) | 13,163) | 12,561) | 12,633) | 12,024) | 11,797) | 12,200) | 12,226) | 11,812) | 11,033) | 10,419) | ||||||
| Solvency Ratio | |||||||||||||||||||||||
| Debt to capital1 | 0.43 | 0.43 | 0.41 | 0.43 | 0.45 | 0.47 | 0.49 | 0.34 | 0.33 | 0.33 | 0.33 | 0.33 | 0.34 | 0.34 | 0.35 | 0.35 | 0.32 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Debt to Capital, Competitors2 | |||||||||||||||||||||||
| Boeing Co. | 1.55 | 1.49 | 1.47 | 1.42 | 1.39 | 1.39 | 1.45 | 1.35 | 1.36 | 1.35 | 1.30 | 1.36 | 1.40 | — | — | — | — | ||||||
| Caterpillar Inc. | 0.68 | 0.66 | 0.64 | 0.67 | 0.67 | 0.70 | 0.70 | 0.70 | 0.69 | 0.70 | 0.69 | 0.69 | 0.70 | — | — | — | — | ||||||
| Eaton Corp. plc | 0.32 | 0.33 | 0.33 | 0.34 | 0.34 | 0.34 | 0.36 | 0.37 | 0.37 | 0.34 | 0.36 | 0.44 | 0.40 | — | — | — | — | ||||||
| GE Aerospace | 0.41 | 0.43 | 0.42 | 0.41 | 0.41 | 0.47 | 0.49 | 0.48 | 0.46 | 0.47 | 0.63 | 0.65 | 0.68 | — | — | — | — | ||||||
| Honeywell International Inc. | 0.61 | 0.56 | 0.54 | 0.55 | 0.53 | 0.54 | 0.49 | 0.52 | 0.51 | 0.51 | 0.54 | 0.54 | 0.54 | — | — | — | — | ||||||
| Lockheed Martin Corp. | 0.74 | 0.72 | 0.65 | 0.66 | 0.62 | 0.63 | 0.49 | 0.50 | 0.54 | 0.52 | 0.55 | 0.65 | 0.66 | — | — | — | — | ||||||
| RTX Corp. | 0.41 | 0.42 | 0.34 | 0.33 | 0.32 | 0.31 | 0.32 | 0.31 | 0.30 | 0.30 | 0.30 | 0.31 | 0.31 | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29).
1 Q1 2024 Calculation
Debt to capital = Total debt ÷ Total capital
= 6,835 ÷ 15,902 = 0.43
2 Click competitor name to see calculations.
- Total Debt
-
Total debt demonstrated a rising trend from early 2020 through late 2022, increasing from approximately $3.35 billion to a peak near $8.12 billion. This upward movement was particularly sharp between mid-2022 quarters, reflecting a substantial increase in the company's borrowing or liabilities during that period. Following this peak, total debt gradually declined into early 2024, reaching around $6.84 billion, indicating efforts to reduce leverage or repay obligations.
- Total Capital
-
Total capital showed steady growth from just over $10.4 billion in the first quarter of 2020 to a high of about $18.1 billion by the end of 2023. This rise was steady with minor fluctuations, reflecting expanding capital base, either through equity growth or retained earnings. However, in the first quarter of 2024, total capital decreased to roughly $15.9 billion, suggesting a possible revaluation, capital restructuring, or changes in equity components.
- Debt to Capital Ratio
-
The debt to capital ratio fluctuated moderately throughout the period. Initially, it moved upward from approximately 0.32 in early 2020 to near 0.35 during 2020, indicating a slight increase in reliance on debt relative to overall capital. From 2021 through early 2022, it stabilized around 0.33 to 0.34. A marked increase occurred in late 2022, peaking around 0.49, correlating with the sharp rise in total debt and suggesting a higher leverage level during that period. Subsequently, the ratio declined steadily to about 0.43 by early 2024, indicating a gradual deleveraging trend or growth in capital relative to debt.
- Summary of Financial Position Trends
-
The overall financial data points to an expanding capital structure alongside increasing debt levels initially. The significant surge in total debt between mid-2022 and late 2022, matched with a corresponding jump in the debt to capital ratio, implies a period of increased leverage which may have been used for investment or operational needs. The following reduction in both total debt and the debt to capital ratio in 2023 and early 2024 signals a move towards balance sheet strengthening and risk mitigation. The minor drop in total capital in early 2024 could indicate adjustments in equity or asset valuations affecting the capital base.
Debt to Assets
Cummins Inc., debt to assets calculation (quarterly data)
| Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Oct 3, 2021 | Jul 4, 2021 | Apr 4, 2021 | Dec 31, 2020 | Sep 27, 2020 | Jun 28, 2020 | Mar 29, 2020 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Loans payable | 342) | 280) | 231) | 419) | 229) | 210) | 217) | 165) | 243) | 208) | 85) | 54) | 93) | 169) | 129) | 109) | 121) | ||||||
| Commercial paper | 609) | 1,496) | 1,710) | 1,617) | 2,545) | 2,574) | 2,393) | 705) | 311) | 313) | 200) | 200) | 317) | 323) | 316) | 2,027) | 1,617) | ||||||
| Current maturities of long-term debt | 113) | 118) | 573) | 575) | 569) | 573) | 55) | 65) | 69) | 59) | 55) | 57) | 61) | 62) | 58) | 66) | 33) | ||||||
| Long-term debt | 5,771) | 4,802) | 4,950) | 5,089) | 4,409) | 4,498) | 5,450) | 3,490) | 3,502) | 3,579) | 3,602) | 3,620) | 3,620) | 3,610) | 3,609) | 1,639) | 1,580) | ||||||
| Total debt | 6,835) | 6,696) | 7,464) | 7,700) | 7,752) | 7,855) | 8,115) | 4,425) | 4,125) | 4,159) | 3,942) | 3,931) | 4,091) | 4,164) | 4,112) | 3,841) | 3,351) | ||||||
| Total assets | 31,827) | 32,005) | 32,097) | 31,735) | 31,433) | 30,299) | 29,769) | 24,477) | 24,122) | 23,710) | 23,063) | 22,608) | 22,962) | 22,624) | 21,568) | 20,314) | 20,076) | ||||||
| Solvency Ratio | |||||||||||||||||||||||
| Debt to assets1 | 0.21 | 0.21 | 0.23 | 0.24 | 0.25 | 0.26 | 0.27 | 0.18 | 0.17 | 0.18 | 0.17 | 0.17 | 0.18 | 0.18 | 0.19 | 0.19 | 0.17 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Debt to Assets, Competitors2 | |||||||||||||||||||||||
| Boeing Co. | 0.36 | 0.38 | 0.39 | 0.39 | 0.41 | 0.42 | 0.42 | 0.42 | 0.43 | 0.42 | 0.43 | 0.43 | 0.42 | — | — | — | — | ||||||
| Caterpillar Inc. | 0.45 | 0.43 | 0.43 | 0.44 | 0.44 | 0.45 | 0.45 | 0.46 | 0.46 | 0.46 | 0.46 | 0.46 | 0.47 | — | — | — | — | ||||||
| Eaton Corp. plc | 0.24 | 0.24 | 0.25 | 0.25 | 0.25 | 0.25 | 0.26 | 0.28 | 0.27 | 0.25 | 0.27 | 0.33 | 0.30 | — | — | — | — | ||||||
| GE Aerospace | 0.13 | 0.13 | 0.13 | 0.13 | 0.14 | 0.17 | 0.17 | 0.18 | 0.18 | 0.18 | 0.27 | 0.27 | 0.29 | — | — | — | — | ||||||
| Honeywell International Inc. | 0.38 | 0.33 | 0.33 | 0.34 | 0.32 | 0.31 | 0.28 | 0.31 | 0.31 | 0.30 | 0.33 | 0.33 | 0.34 | — | — | — | — | ||||||
| Lockheed Martin Corp. | 0.35 | 0.33 | 0.31 | 0.31 | 0.29 | 0.29 | 0.22 | 0.22 | 0.23 | 0.23 | 0.23 | 0.23 | 0.24 | — | — | — | — | ||||||
| RTX Corp. | 0.27 | 0.27 | 0.22 | 0.22 | 0.21 | 0.20 | 0.21 | 0.20 | 0.20 | 0.20 | 0.20 | 0.20 | 0.20 | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29).
1 Q1 2024 Calculation
Debt to assets = Total debt ÷ Total assets
= 6,835 ÷ 31,827 = 0.21
2 Click competitor name to see calculations.
- Total Debt
- The total debt exhibited a general upward trend from March 2020 through December 2022, increasing from approximately $3.35 billion to a peak near $8.12 billion. This reflects a significant increase in leverage over this period. However, from late 2022 onwards, the total debt gradually declined, reaching around $6.83 billion by the end of the most recent period in March 2024. This reduction indicates a strategic deleveraging after the peak debt level.
- Total Assets
- Total assets showed consistent growth over the entire period. Starting from about $20.08 billion in March 2020, assets increased steadily, with an accelerated rise observed from June 2022 onwards, reaching approximately $31.83 billion by March 2024. This steady asset growth points to ongoing investment and potential expansion efforts by the company.
- Debt to Assets Ratio
- The debt to assets ratio remained relatively stable at around 0.17 to 0.19 from March 2020 to June 2022, implying moderate leverage relative to asset base during this phase. A notable jump occurred in the latter half of 2022, where the ratio surged to approximately 0.27, reflecting the sharp increase in debt outpacing asset growth temporarily. Subsequently, the ratio declined consistently to about 0.21 by March 2024, aligning with the reduction in total debt and stabilization of assets. This suggests improved capital structure management and reduced reliance on debt financing moving forward.
Financial Leverage
Cummins Inc., financial leverage calculation (quarterly data)
| Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Oct 3, 2021 | Jul 4, 2021 | Apr 4, 2021 | Dec 31, 2020 | Sep 27, 2020 | Jun 28, 2020 | Mar 29, 2020 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Total assets | 31,827) | 32,005) | 32,097) | 31,735) | 31,433) | 30,299) | 29,769) | 24,477) | 24,122) | 23,710) | 23,063) | 22,608) | 22,962) | 22,624) | 21,568) | 20,314) | 20,076) | ||||||
| Total Cummins Inc. shareholders’ equity | 9,067) | 8,850) | 10,658) | 10,337) | 9,623) | 8,975) | 8,380) | 8,738) | 8,436) | 8,474) | 8,082) | 7,866) | 8,109) | 8,062) | 7,700) | 7,192) | 7,068) | ||||||
| Solvency Ratio | |||||||||||||||||||||||
| Financial leverage1 | 3.51 | 3.62 | 3.01 | 3.07 | 3.27 | 3.38 | 3.55 | 2.80 | 2.86 | 2.80 | 2.85 | 2.87 | 2.83 | 2.81 | 2.80 | 2.82 | 2.84 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Financial Leverage, Competitors2 | |||||||||||||||||||||||
| Boeing Co. | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||
| Caterpillar Inc. | 4.75 | 4.49 | 4.24 | 4.68 | 4.61 | 5.16 | 5.19 | 5.16 | 4.82 | 5.02 | 4.85 | 4.85 | 4.87 | — | — | — | — | ||||||
| Eaton Corp. plc | 2.00 | 2.02 | 2.03 | 2.05 | 2.04 | 2.06 | 2.14 | 2.15 | 2.12 | 2.07 | 2.14 | 2.39 | 2.27 | — | — | — | — | ||||||
| GE Aerospace | 5.49 | 5.96 | 5.47 | 5.23 | 5.20 | 5.16 | 5.75 | 5.35 | 4.92 | 4.93 | 6.33 | 7.09 | 7.30 | — | — | — | — | ||||||
| Honeywell International Inc. | 3.99 | 3.88 | 3.56 | 3.60 | 3.54 | 3.73 | 3.40 | 3.55 | 3.45 | 3.47 | 3.60 | 3.56 | 3.53 | — | — | — | — | ||||||
| Lockheed Martin Corp. | 8.27 | 7.67 | 6.11 | 6.17 | 5.66 | 5.71 | 4.35 | 4.53 | 5.15 | 4.64 | 5.38 | 7.99 | 8.15 | — | — | — | — | ||||||
| RTX Corp. | 2.65 | 2.71 | 2.33 | 2.24 | 2.22 | 2.19 | 2.25 | 2.26 | 2.20 | 2.21 | 2.23 | 2.23 | 2.24 | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29).
1 Q1 2024 Calculation
Financial leverage = Total assets ÷ Total Cummins Inc. shareholders’ equity
= 31,827 ÷ 9,067 = 3.51
2 Click competitor name to see calculations.
The financial data given reflects trends in total assets, shareholders' equity, and financial leverage over multiple quarters.
- Total assets
- Total assets showed a consistent upward trend from the beginning of the period, rising from approximately 20.1 billion US dollars to over 32 billion US dollars by the end of the timeframe. There was a steady increase quarter over quarter, with particularly notable growth during late 2022. After peaking around late 2023, total assets appeared to stabilize or slightly decline by the first quarter of 2024.
- Total shareholders’ equity
- Shareholders’ equity generally increased during the period, growing from roughly 7.1 billion US dollars to over 10.6 billion by late 2023. This positive trend reflects an improvement in the company's net asset base. However, there was a decline observed in the final quarters, dropping to about 9.1 billion by the first quarter of 2024. This fluctuation suggests some challenges or adjustments in retained earnings or equity financing during this period.
- Financial leverage
- The financial leverage ratio remained relatively stable around 2.8 to 2.9 through most of the initial periods, signaling a consistent balance between debt and equity. Starting from late 2022, there was a marked increase in leverage ratios, exceeding 3.5 at its peak by early 2024. This rise in financial leverage indicates a growing reliance on debt or liabilities relative to equity, which may imply increased financial risk or strategic borrowing to finance asset growth. The increased leverage coincides with the stabilization or slight decrease in equity observed in the same timeframe.
Interest Coverage
Cummins Inc., interest coverage calculation (quarterly data)
| Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Oct 3, 2021 | Jul 4, 2021 | Apr 4, 2021 | Dec 31, 2020 | Sep 27, 2020 | Jun 28, 2020 | Mar 29, 2020 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||||||||||||||||||
| Net income attributable to Cummins Inc. | 1,993) | (1,431) | 656) | 720) | 790) | 631) | 400) | 702) | 418) | 394) | 534) | 600) | 603) | 501) | 501) | 276) | 511) | ||||||
| Add: Net income attributable to noncontrolling interest | 35) | 38) | 34) | 17) | 16) | 13) | 9) | 5) | 5) | 6) | 7) | 12) | 8) | 9) | 3) | (7) | 17) | ||||||
| Add: Income tax expense | 193) | 163) | 188) | 212) | 223) | 134) | 199) | 148) | 155) | 114) | 134) | 167) | 172) | 125) | 182) | 93) | 127) | ||||||
| Add: Interest expense | 89) | 92) | 97) | 99) | 87) | 87) | 61) | 34) | 17) | 26) | 28) | 29) | 28) | 29) | 25) | 23) | 23) | ||||||
| Earnings before interest and tax (EBIT) | 2,310) | (1,138) | 975) | 1,048) | 1,116) | 865) | 669) | 889) | 595) | 540) | 703) | 808) | 811) | 664) | 711) | 385) | 678) | ||||||
| Solvency Ratio | |||||||||||||||||||||||
| Interest coverage1 | 8.47 | 5.34 | 10.82 | 11.07 | 13.16 | 15.17 | 19.51 | 25.97 | 26.46 | 25.78 | 26.19 | 26.97 | 24.49 | 24.38 | 23.22 | 23.71 | 27.44 | ||||||
| Benchmarks | |||||||||||||||||||||||
| Interest Coverage, Competitors2 | |||||||||||||||||||||||
| Boeing Co. | 0.21 | 0.18 | -0.06 | -0.85 | -0.53 | -0.98 | -2.54 | -1.40 | -1.31 | -0.88 | -2.29 | -2.55 | -4.26 | — | — | — | — | ||||||
| Caterpillar Inc. | 27.68 | 26.66 | 24.81 | 23.80 | 21.33 | 20.80 | 22.05 | 20.08 | 19.10 | 17.88 | 14.11 | 11.79 | 9.28 | — | — | — | — | ||||||
| Eaton Corp. plc | 32.04 | 26.34 | 22.25 | 19.68 | 19.85 | 21.22 | 21.33 | 24.31 | 22.57 | 21.11 | 20.08 | 15.71 | 11.87 | — | — | — | — | ||||||
| GE Aerospace | 6.11 | 10.12 | 9.41 | 8.49 | 6.73 | 1.88 | -1.66 | -1.16 | -1.49 | -0.96 | 2.15 | 1.11 | 0.65 | — | — | — | — | ||||||
| Honeywell International Inc. | 9.89 | 10.36 | 10.68 | 12.45 | 14.34 | 16.41 | 20.95 | 20.60 | 21.35 | 22.09 | 20.98 | 18.89 | 16.79 | — | — | — | — | ||||||
| Lockheed Martin Corp. | 9.19 | 9.84 | 10.42 | 11.74 | 10.58 | 11.72 | 13.31 | 10.88 | 14.12 | 14.27 | 13.67 | 15.97 | 15.44 | — | — | — | — | ||||||
Based on: 10-Q (reporting date: 2024-03-31), 10-K (reporting date: 2023-12-31), 10-Q (reporting date: 2023-09-30), 10-Q (reporting date: 2023-06-30), 10-Q (reporting date: 2023-03-31), 10-K (reporting date: 2022-12-31), 10-Q (reporting date: 2022-09-30), 10-Q (reporting date: 2022-06-30), 10-Q (reporting date: 2022-03-31), 10-K (reporting date: 2021-12-31), 10-Q (reporting date: 2021-10-03), 10-Q (reporting date: 2021-07-04), 10-Q (reporting date: 2021-04-04), 10-K (reporting date: 2020-12-31), 10-Q (reporting date: 2020-09-27), 10-Q (reporting date: 2020-06-28), 10-Q (reporting date: 2020-03-29).
1 Q1 2024 Calculation
Interest coverage
= (EBITQ1 2024
+ EBITQ4 2023
+ EBITQ3 2023
+ EBITQ2 2023)
÷ (Interest expenseQ1 2024
+ Interest expenseQ4 2023
+ Interest expenseQ3 2023
+ Interest expenseQ2 2023)
= (2,310 + -1,138 + 975 + 1,048)
÷ (89 + 92 + 97 + 99)
= 8.47
2 Click competitor name to see calculations.
The EBIT values exhibit notable volatility over the observed period, with fluctuations reflecting several cycles of increase and decrease. Initially, EBIT starts at a moderate level, followed by a dip mid-2020, then a recovery and a rise till early 2022. The latter part of 2022 and most of 2023 show significant growth, culminating in a strong peak at the start of 2024, despite one sharp negative outlier in late 2023. This suggests periods of operational challenges followed by strong performance intervals.
Interest expense reveals a relatively increasing trend over the whole period, with amounts nearly quadrupling from early 2020 to the end of 2023, before slightly dipping in early 2024. This steady increase indicates rising borrowing costs or higher debt levels that the company incurred over time.
The interest coverage ratio, which measures the company’s ability to meet interest obligations from operating earnings, generally declines throughout the period. In early 2020, the ratio was robust, well above 20, but it steadily decreases, dropping below 20 in late 2022 and nearing single digits by early 2024. The sharp decline in interest coverage around the end of 2023 coincides with the negative EBIT value, signaling a temporary strain in covering interest expenses from operating profits.
- EBIT (Earnings before Interest and Tax)
- Demonstrates significant variability with cyclical dips and recoveries. Noteworthy is the sharp negative value in late 2023, surrounded by generally increasing values reaching a record high in early 2024.
- Interest Expense
- Displays a general upward trend over the period, with consistent increases indicating escalating financing costs or rising levels of debt.
- Interest Coverage Ratio
- Shows a downward trajectory, reflecting decreasing ease in covering interest obligations from EBIT. The ratio remains comfortably high during the first two years but substantially weakens afterward, highlighting increased financial risk or tightening profit margins.