Cummins (CMI) Q3 2026 Earnings Call: Q&A Summary

Q: Oliver from Morgan Stanley asked if passing through non-conforming penalties is predicated on a disciplined OEM market and if the EPA will finalize rules after 2027.

A: Jennifer Rumsey, Chair and CEO, stated they anticipate the EPA final rule in December with non-conforming penalties included, and noted Cummins is working with OEMs on a phased product transition.

Q: Oliver from Morgan Stanley asked for color on the nature of supply chain constraints and which segments will benefit most as they are resolved.

A: Mark Smith, CFO, explained that a challenge with a Power Systems supplier in the third quarter limited engine production, which will be recovered in the fourth quarter.

Q: Jerry Revich of Wells Fargo Securities asked if there has been any movement in the Power Systems backlog and capacity shipments to other regions.

A: Jennifer Rumsey responded that order intake exceeded expectations with orders extending into the second half of 2028, noting strong global demand particularly in China and Asia Pacific.

Q: Jerry Revich of Wells Fargo Securities asked about capacity expansion progress and whether fourth quarter Power Systems margins imply a step down.

A: Jennifer Rumsey stated capacity investments are on track, and Mark Smith confirmed that fourth-quarter margins may be slightly lower due to natural variation and shorter production days but do not reflect any change in underlying trajectory.

Q: Jamie Cook of Truist Securities asked about confidence in achieving 25% incremental margins given EPA 2027 complexities and the drivers of strong margins on softer revenues.

A: Mark Smith expressed confidence in long-term targets, noting strong underlying performance and operational execution despite minor third-quarter revenue misses.

Q: Kyle Menges of Citigroup asked for a framework on Power Systems margins and incrementals, and how Cummins is managing potential pre-buys or air pockets in North American trucks.

A: Mark Smith reiterated that Power Systems and distribution margins will trend higher over time, while Jennifer Rumsey noted limited pre-buy in the U.S. truck market with strong underlying demand.

Q: David Raso of Evercore ISI asked about domestic versus international power demand, profitability, and China JV contributions.

A: Jennifer Rumsey highlighted strong global demand driven by AI data centers, and Mark Smith noted that international data center orders have reached parity with domestic orders.

Q: Robert Wertheimer of Melius Research asked about the repeatability of the stationary energy storage announcement and early indications for the 130-liter natural gas engine.

A: Jennifer Rumsey stated that grid stability interest is strong for stationary storage and noted that the 130-liter natural gas engine is progressing toward pilot production in 2028.

Q: Tami Zakaria of JPMorgan asked if the recent battery energy storage system contract was embedded in multiyear targets and about price-cost dynamics.

A: Mark Smith stated the project is exciting but not the most significant factor in guidance, and noted a slight cost creep from freight and shortages resulting in a minor headwind.

Q: Kristen Owen of Oppenheimer asked what supports the sequential 23% growth in distribution guidance for the fourth quarter.

A: Mark Smith explained it is driven by catching up on large engine deliveries delayed from the third quarter, while Jennifer Rumsey noted the mix of aftermarket parts and data center projects.