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Cummins (CMI) to Report Q1 Earnings: Is a Beat in Store?

Zacks Equity Research

Cummins Inc. CMI) is scheduled to report first-quarter 2019 earnings on Apr 30, before the market opens. In the last reported quarter, its earnings missed estimates. The earnings record shows that the company beat estimates in three of the trailing four quarters and missed the mark once. The average positive earnings surprise is 6.3%.

In the past three months, shares of Cummins have outperformed the Auto sector. The stock has gained 16% compared with the sector’s growth of 4.1% during that period.

Let’s see, how things are shaping up for this announcement.

Cummins Inc. Price and EPS Surprise


Cummins Inc. Price and EPS Surprise | Cummins Inc. Quote

Why a Positive Surprise is Likely in This Quarter

Our proven model predicts that Cummins is likely to beat earnings estimates in this quarter. This is because a stock needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for increasing the odds of an earnings beat.

Earnings ESP: Cummins has an Earnings ESP of +2.02% as the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $3.59 and $3.51, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

What’s Driving Better-Than-Expected Earnings?

A better-than-expected PMI of China is likely to bode well for Cummins in the first quarter of 2019. With most of the company’s end markets largely depending on China, an improvement in the economy is expected to drive sales.

Further, robust demand for construction and power generation equipment across the globe will likely bolster Cummins Power Generation unit sales. Higher volume and favorable pricing for the sold equipment will drive Cummins’ revenues in first-quarter 2019.

For the soon-to-be-reported quarter, the Zacks Consensus Estimate for net sales of the company’s four segments — Engine, Distribution, Components and Power Generation — are pegged at $2.48 billion, $1.88 billion, $1.77 billion and $1.11 billion, respectively.

However, lowered trucking orders in North America, owing to raised interest rates, might hamper it’s engine and component segments’ sales in first-quarter 2019. Moreover, Europe’s weaker-than-expected PMI raised concerns of the economic slowdown, thereby, hurting Cummins’ performance.

Other Stocks to Consider

Here are a few other stocks from the same space, with the right combination of elements to outpace earnings estimates this time around:

Lear Corporation LEA has an Earnings ESP of +0.49% and a Zacks Rank of 3. Its first-quarter 2019 results are set to be reported on Apr 26.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Oshkosh Corporation OSK has an Earnings ESP of +1.62% and a Zacks Rank #2. Its second-quarter fiscal 2019 results are slated to be released on Apr 30.

General Motors Company GM has an Earnings ESP of +5.61% and is a #3 Ranked player. Its first-quarter 2019 results are slated to be reported on Apr 30.

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General Motors Company (GM) : Free Stock Analysis Report
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