Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
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- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Reportable Segments
- Price to FCFE (P/FCFE)
- Selected Financial Data since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Debt
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Profitability Ratios (Summary)
Cummins Inc., profitability ratios
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).
- Gross Profit Margin
- The gross profit margin shows a gradual decline from 25.37% in 2019 to 23.71% in 2021, followed by a slight recovery to 24.22% by 2023. This indicates a relatively stable but slightly decreasing efficiency in controlling production costs relative to revenue over the five-year period.
- Operating Profit Margin
- The operating profit margin remained relatively consistent around 11.45% during 2019 and 2020, with a slight decrease to 10.43% in 2022. However, a significant drop occurred in 2023, falling sharply to 5.17%. This suggests a considerable increase in operating expenses or a decline in operating income in the most recent year.
- Net Profit Margin
- The net profit margin followed a downward trend, decreasing from 9.59% in 2019 to 7.66% in 2022, with a steep decline to 2.16% in 2023. This trend highlights diminishing profitability at the bottom line, reflecting increased costs, expenses, or other factors adversely affecting net income.
- Return on Equity (ROE)
- ROE experienced a notable decline from a high of 30.11% in 2019 to 22.19% in 2020. It rebounded somewhat to 25.15% in 2021 but then declined again to 23.97% in 2022 before a sharp drop to 8.31% in 2023. This pattern suggests fluctuating effectiveness in generating returns for shareholders, with a significant decrease in 2023 indicating weakened profitability or capital utilization.
- Return on Assets (ROA)
- ROA decreased steadily from 11.45% in 2019 to 7.91% in 2020, followed by a modest recovery to 8.99% in 2021. It declined once more to 7.1% in 2022, with a sharp reduction to 2.3% in 2023. The trend points to declining efficiency in asset utilization to generate profits, particularly pronounced in the latest year.
Return on Sales
Return on Investment
Gross Profit Margin
Cummins Inc., gross profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Gross margin | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| Gross profit margin1 | ||||||
| Benchmarks | ||||||
| Gross Profit Margin, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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).
1 2023 Calculation
Gross profit margin = 100 × Gross margin ÷ Net sales
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data demonstrates several important trends in the company's performance over the five-year period ending December 31, 2023.
- Net Sales
- Net sales exhibit a fluctuating but overall upward trend. There was a decrease from $23,571 million in 2019 to $19,811 million in 2020, likely reflecting external challenges during that year. However, sales recovered strongly in subsequent years, increasing to $24,021 million in 2021, $28,074 million in 2022, and reaching $34,065 million in 2023. This suggests successful growth and expansion efforts post-2020.
- Gross Margin
- Gross margin in absolute terms mirrors the pattern of net sales with an initial decline followed by consistent growth. The margin declined from $5,980 million in 2019 to $4,894 million in 2020, then increased to $5,695 million in 2021, $6,719 million in 2022, and $8,249 million in 2023. The rise in gross margin after 2020 indicates improved production efficiency or favorable cost conditions alongside sales growth.
- Gross Profit Margin Percentage
- The gross profit margin percentage remained relatively stable but showed a slight downward trend from 25.37% in 2019 to a low of 23.71% in 2021. Thereafter, there was a modest recovery to 23.93% in 2022 and 24.22% in 2023. Despite fluctuations, the margin percentage stayed within a narrow range of approximately 23.7% to 25.4%, reflecting consistent cost of goods sold management relative to revenue.
Operating Profit Margin
Cummins Inc., operating profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Operating income | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| Operating profit margin1 | ||||||
| Benchmarks | ||||||
| Operating Profit Margin, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Operating Profit Margin, Sector | ||||||
| Capital Goods | ||||||
| Operating Profit Margin, Industry | ||||||
| Industrials | ||||||
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).
1 2023 Calculation
Operating profit margin = 100 × Operating income ÷ Net sales
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data over the five-year period from 2019 to 2023 reveals several notable trends in the operating income, net sales, and operating profit margin.
- Operating Income
- Operating income experienced a decline from 2700 million US dollars in 2019 to 2269 million in 2020, followed by a recovery to 2706 million in 2021 and an increase to 2929 million in 2022. However, in 2023, operating income sharply decreased to 1761 million, marking the lowest point in the observed period.
- Net Sales
- Net sales showed a fluctuating but overall increasing trend. Beginning at 23571 million US dollars in 2019, net sales dropped to 19811 million in 2020. Subsequently, they increased significantly each year, reaching 24021 million in 2021, 28074 million in 2022, and peaking at 34065 million in 2023. This indicates solid sales growth after a pandemic-related dip in 2020.
- Operating Profit Margin
- The operating profit margin remained relatively stable around 11.4% from 2019 to 2020 and slightly decreased to 11.27% in 2021. It then declined more noticeably to 10.43% in 2022, followed by a dramatic drop to 5.17% in 2023. This significant decline indicates worsening profitability relative to net sales in the latest period.
Overall, while the company managed to grow its net sales substantially from 2020 onward, the operating income and especially the operating profit margin did not keep pace, suggesting increased costs or reduced efficiency. The steep drop in operating profit margin and operating income in 2023 despite record sales volume points to potential challenges in cost management or pricing pressure during that year.
Net Profit Margin
Cummins Inc., net profit margin calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Cummins Inc. | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| Net profit margin1 | ||||||
| Benchmarks | ||||||
| Net Profit Margin, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| Net Profit Margin, Sector | ||||||
| Capital Goods | ||||||
| Net Profit Margin, Industry | ||||||
| Industrials | ||||||
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).
1 2023 Calculation
Net profit margin = 100 × Net income attributable to Cummins Inc. ÷ Net sales
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Income Attributable to Cummins Inc.
- The net income demonstrates a fluctuating trend over the observed periods. Starting at $2,260 million in 2019, it decreased notably to $1,789 million in 2020, likely reflecting adverse conditions during that year. A recovery was evident in 2021 and 2022 with net income reaching $2,131 million and $2,151 million respectively. However, a sharp decline occurred in 2023, dropping to $735 million, which represents a significant reduction compared to previous years.
- Net Sales
- Net sales increased steadily throughout the five-year span. Beginning at $23,571 million in 2019, sales decreased to $19,811 million in 2020, mirroring the decline in net income. Following this dip, net sales experienced consistent growth, rising to $24,021 million in 2021, $28,074 million in 2022, and reaching $34,065 million in 2023. This upward trend indicates sustained market demand and expansion in revenue-generating activities.
- Net Profit Margin
- The net profit margin shows a general downward trajectory over the years. It declined from 9.59% in 2019 to 9.03% in 2020, continuing a gradual decrease to 8.87% in 2021 and 7.66% in 2022. A significant contraction is observed in 2023, where the margin plummeted to 2.16%. This steep decline suggests increased costs, reduced pricing power, or other factors negatively impacting profitability despite rising sales.
- Overall Analysis
- The data suggests that while the company successfully increased its sales revenue following the 2020 downturn, profitability did not keep pace. The consistent reduction in net profit margin combined with the sharp fall in net income in 2023 points to potential challenges in cost management or market conditions affecting earnings. The disparity between rising sales and decreasing profitability in the most recent year warrants further investigation to identify underlying causes and address financial performance issues.
Return on Equity (ROE)
Cummins Inc., ROE calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Cummins Inc. | ||||||
| Total Cummins Inc. shareholders’ equity | ||||||
| Profitability Ratio | ||||||
| ROE1 | ||||||
| Benchmarks | ||||||
| ROE, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| ROE, Sector | ||||||
| Capital Goods | ||||||
| ROE, Industry | ||||||
| Industrials | ||||||
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).
1 2023 Calculation
ROE = 100 × Net income attributable to Cummins Inc. ÷ Total Cummins Inc. shareholders’ equity
= 100 × ÷ =
2 Click competitor name to see calculations.
- Net Income Attributable to Cummins Inc.
- The net income showed a decline from 2019 to 2020, decreasing from $2,260 million to $1,789 million. In the subsequent years, there was a recovery as net income increased to $2,131 million in 2021 and slightly rose further to $2,151 million in 2022. However, in 2023, net income sharply declined to $735 million, indicating a significant drop compared to previous years.
- Total Cummins Inc. Shareholders’ Equity
- Shareholders’ equity exhibited a consistent upward trend from 2019 through 2022, rising from $7,507 million in 2019 to $8,975 million in 2022. Despite this growth, there was a marginal decrease in 2023, as equity slightly declined to $8,850 million.
- Return on Equity (ROE)
- ROE declined substantially from a high of 30.11% in 2019 to 22.19% in 2020. This was followed by a moderate recovery in 2021 to 25.15% and a slight decrease in 2022 to 23.97%. In 2023, ROE dropped markedly to 8.31%, reflecting a steep decline in profitability relative to shareholders’ equity.
- Overall Analysis
- The financial data indicates that, while shareholders’ equity generally increased over the five-year period, profitability metrics experienced volatility. The net income and ROE both suffered notable declines in 2020, partially recovered in the following years, but faced significant deterioration in 2023. This suggests that despite the company’s growing equity base, its ability to generate returns for shareholders diminished considerably in the latest year under review.
Return on Assets (ROA)
Cummins Inc., ROA calculation, comparison to benchmarks
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net income attributable to Cummins Inc. | ||||||
| Total assets | ||||||
| Profitability Ratio | ||||||
| ROA1 | ||||||
| Benchmarks | ||||||
| ROA, Competitors2 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
| ROA, Sector | ||||||
| Capital Goods | ||||||
| ROA, Industry | ||||||
| Industrials | ||||||
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).
1 2023 Calculation
ROA = 100 × Net income attributable to Cummins Inc. ÷ Total assets
= 100 × ÷ =
2 Click competitor name to see calculations.
The financial data indicates a notable fluctuation in net income and return on assets (ROA) over the five-year period, alongside a consistent increase in total assets.
- Net Income
- Net income showed a downward trend from 2019 to 2020, decreasing from 2,260 million US dollars to 1,789 million. This was followed by a recovery period during 2021 and 2022, with values rising to 2,131 million and 2,151 million respectively. However, 2023 experienced a significant decline to 735 million, which is considerably lower than in prior years.
- Total Assets
- Total assets steadily increased each year, starting at 19,737 million US dollars in 2019 and reaching 32,005 million by the end of 2023. This represents a consistent asset growth trajectory, with the largest increment occurring between 2021 and 2022.
- Return on Assets (ROA)
- ROA demonstrated a declining trend across the period under review. It began at 11.45% in 2019, decreased to 7.91% in 2020, and then slightly fluctuated in the following years, recording 8.99% in 2021 and 7.1% in 2022. The figure dropped sharply in 2023 to 2.3%, reflecting diminished efficiency in generating profit from assets.
Overall, while total assets grew consistently, the company’s profitability measures, both net income and ROA, exhibited a mixed pattern with a notable decrease in 2023. This suggests that despite asset expansion, the company faced challenges in maintaining profitability and asset utilization efficiency during the most recent period.