Cummins Inc. (CMI) Cash Flow Statement

The OCF/NI ratio of 1.61 in 2026Q2 suggests strong cash conversion, but the 0.47 in 2026Q1 and negative readings in 2024Q2 reveal that net income often outpaces cash generation due to working capital timing. This volatility implies that reported earnings may not consistently translate into cash, warranting scrutiny of accruals and inventory management.

The sharp rebound in FCF margin in 2026Q2 is encouraging, yet the prior quarters show extreme swings, including a -12.4% margin in 2024Q2. This pattern suggests that FCF is highly sensitive to working capital and capex timing, and the recent strength may not be sustainable if truck demand softens.

The capex-to-revenue ratio is relatively low compared to industrial peers, suggesting a maintenance-heavy capex profile. However, the Q4 spikes may reflect investments in new product launches or capacity expansions, which could signal growth-oriented spending. Investors should monitor whether these investments support future revenue growth or merely sustain existing operations.

The large positive working capital contributions in 2026Q2 and 2025Q4 suggest efficient collections or inventory reductions, while the negative swings in 2024Q2 and 2025Q1 indicate build-ups or delayed payments. This volatility implies that management may be using working capital levers to smooth earnings, but it also highlights the cyclicality of the business.

The consistent dividend payout suggests management's commitment to returning capital, even during quarters with negative FCF. The resumption of buybacks in 2026Q1 and Q2, after a pause in 2025, may indicate confidence in cash generation, but it also reduces cash available for other uses. Investors should assess whether these returns are sustainable given the cyclicality of FCF.

The $1.4B cumulative shortfall suggests that earnings have not fully converted to cash, possibly due to working capital investments or non-cash items. This divergence may indicate lower earnings quality or that cash is tied up in operations, warranting further investigation into the drivers of this gap.