Cummins and GoPro have been highlighted as Zacks Bull and Bear of the Day
For Immediate Release
Chicago, IL – July 17, 2023 – Zacks Equity Research shares Cummins Inc. CMI as the Bull of the Day and GoPro, Inc. GPRO as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Tesla TSLA, Genuine Parts Company GPC and General Motors Company GM.
Here is a synopsis of all five stocks.
Bull of the Day:
Cummins Inc. is a historic U.S. engine maker that’s benefiting from strong growth in its legacy segments and posting huge expansion in its future-focused Accelera unit that includes hydrogen technology and much more.
Cummins posted back-to-back years of big revenue growth and its outlook for 2023 is equally impressive.
On top of all that, CMI shares have soared roughly 20% since the start of June after it found support at a key long-term moving average.
Cutting-Edge Old Tech and New Age Efforts
The Indiana-based firm is one of the most well-known engine makers in the U.S., with a diverse and ever-growing portfolio of power solutions. Cummins’ products include diesel, natural gas, electric, and hybrid powertrains. CMI also makes powertrain-related components such as filtration, turbochargers, fuel systems, controls systems, air handling systems, brakes, suspension systems, and beyond.
Alongside these wide-ranging offerings, Cummins is investing rather heavily in new-age technologies such as electric power generation systems, batteries, electrified power systems, electric powertrains, hydrogen production, and fuel cell products. The company also utilized its sturdy balance sheet to make some strategic forward-looking acquisitions.
Cummins last August bought Meritor to help it add a leading maker of electric powertrain solutions for both commercial vehicles and industrial markets. CMI then in November bought Siemens’ Commercial Vehicles business to help further accelerate its development of electrified power solutions.
On top of that, Cummins back in October said it would start producing electrolyzers in the U.S. The move is part of its effort to drive forward the green hydrogen push, which the Federal government is actively supporting through spending and tax incentives.
The next frontier that could make hydrogen fuel cell technology one of the most important players in a greener economy is figuring out how to make electrolyzing water into hydrogen and oxygen far more cost competitive. Cummins is aiming to become part of the pioneering class of clean hydrogen and other futuristic power.
Recent Growth and Outlook
Cummins’ revenue climbed 21% in 2021 and 17% in 2022 to help it blow away its pre-covid levels at $28.07 billion in FY22 vs. $23.57 billion in FY19. The company’s growth is a bit less steady compared to some other segments of the economy. But that is par for the course for CMI because it is forced to navigate larger economic cycles that impact its customers’ decisions on when to buy its rather expensive offerings.
The company’s New Power division has been rebranded to Accelera and includes batteries, fuel cells, hydrogen-production technologies such as electrolyzers, and more. It is still by far the smallest segment, but its sales soared 174% in the first quarter of 2023. Cummins also significantly upped its revenue guidance for 2023 in early May.
Zacks estimates call for CMI’s sales to climb another 17% in 2023 to reach nearly $33 billion. Meanwhile, its adjusted earnings are projected to soar 31% this year to $19.80 a share.
Cummins is projected to follow up this very impressive and tough-to-compete against stretch with top and bottom line growth next year as well. CMI’s earnings revisions have started to trend higher once again to help the stock land a Zacks Rank #1 (Strong Buy) right now.
Other Fundamentals
CMI shares have crushed the S&P 500 over the last 25 years, up roughly 1,700% vs. 390%. More recently, Cummins stock has climbed nearly 90% in the past five years. CMI stock is up just 4% in 2023. That said, Cummins has roared back recently, up around 20% since the start of June after it found support right around its 200-week moving average.
CMI is now back well above its 50-week moving average, and it is clear of both its 50-day and 200-day moving averages again as well. Despite the resurgence, CMI still trades roughly 10% below its own record highs at the moment.
On the valuation front, Cummins trades at a nearly 40% discount to its own decade-long highs and 5% beneath its median at 12.7X forward 12-month earnings. This marks a 35% discount to its industry despite CMI’s massive outperformance over the last decade.
Bottom Line
Cummins has boosted its dividend every year for more than a decade, including a 7.4% annualized increase over the last five years. The firm on July 11 increased its dividend by another 7% from $1.57 a share to $1.68 a share. The new payout would have it yield 2.7% to top its industry’s 1.1% average.
If Cummins reports upbeat results and offers solid guidance when it releases its Q2 earnings in early August, CMI stock might be able to break out to new 52-week highs and start to mount a comeback toward its peaks.
Bear of the Day:
GoPro, Inc. stock skyrocketed for several months following its 2014 IPO, only to tumble for years, finally bottoming during the initial Covid-crash. The action-focused camera maker has once again seen its stock fall after a solid run as Wall Street reacts negatively to its fading earnings outlook and lack of sustainable sales growth.
A Tough-to-Capture Market
GoPro makes small, mountable cameras that shoot both videos and photos. GPRO’s offerings grew popular within the action sports world, from the ski slopes to mountain bike trails, and beyond. GoPro’s various small high-resolution cameras are waterproof, with impressive stabilization features and much more.
All in all, GoPro cameras appeal to people taking pictures and videos in situations where their smartphones won’t cut it. But the problem for GoPro is that its addressable market appears not to be growing much, and it was always somewhat niche to begin with. Worse yet, Apple and other smartphones feature better cameras than ever.
GoPro posted around $1.6 billion in sales in 2015. Unfortunately, it has been nearly all downhill from there for GPRO, with its sales falling YoY in five out of the past seven years. The company did grow its sales by roughly 30% in FY21 as consumers spent heavily.
GoPro’s revenue then fell around 6% in 2022 and it is projected to come in roughly flat in 2023. On top of that, its adjusted earnings tumbled around 48% last year and they are projected to fall another 72% to $0.13 a share in FY23, based on current Zacks estimates.
That said, GPRO’s sales are expected to bounce back in FY24 to the tune of 12% growth. Plus, its adjusted earnings are projected to rebound in a huge way as well.
Bottom Line
Unfortunately for GoPro, its earnings outlook has already tanked as the economy normalized following the Covid chaos. The company’s adjusted EPS revisions continue to trend in the wrong direction. Plus, its most accurate/most recent estimate for FY24 came in 25% below the current consensus.
GoPro’s downward earnings revisions trends help it land a Zacks Rank #5 (Strong Sell) right now. GoPro also continues to face tons of competition from improving smartphones like Apple’s iPhone and beyond.
Any investors interested in trying to buy GPRO might want to wait until the company releases its Q2 results on August 3.
Additional content:
What to Expect from Tesla (TSLA) Q2 Earnings This Week
Tesla is set to post its second-quarter 2023 results on Jul 19 after the closing bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings and revenues is pegged at 83 cents per share and $24.88 billion, respectively.
Tesla surpassed the Zacks Consensus Estimate for earnings in the last reported quarter on higher-than-expected revenues from the Energy Generation/Storage and Services/Other segments. Over the trailing four quarters, Tesla beat the Zacks Consensus Estimate on all occasions, the average being 11.71%. This is depicted in the graph below:
Tesla, Inc. price-eps-surprise | Tesla, Inc. Quote
Will the company be able to maintain its winning streak this time around as well?
Estimate Revisions
The Zacks Consensus Estimate for second-quarter earnings per share has remained unchanged in the past seven days. The estimate for the bottom line implies a year-over-year rise of 9.21%. The Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 46.95%.
Factors in Play
The company delivered 466,140 cars worldwide in the second quarter, up 83% from the year-ago quarter and 10% from the prior quarter. Total deliveries also surpassed the Zacks Consensus Estimate of 444,569 units amid multiple price changes. Our estimate for the same was 434,736 units.
Tesla delivered 446,915 Model 3/Y units in the to-be-reported quarter, topping the Zacks Consensus Estimate of 419,987 units. Our estimate for the same was 420,156 units. Stronger-than-expected deliveries for Model 3/Y are expected to play in favor of Tesla’s upcoming results.
Starting this year, Tesla offered steep discounts on its models in the United States, China and elsewhere to spur demand, which is also likely to have elevated automotive revenues to some extent. The automaker is riding on the robust demand for Models 3 and Y, which form a major chunk of its total deliveries.
The Zacks Consensus Estimate and our forecast for Tesla’s Energy Generation and Storage revenues are pegged at $1,690.90 million and $1573.70 million, respectively, suggesting a rise from $866 million recorded in the same quarter of 2022.
The Zacks Consensus Estimate and our estimate for revenues for Tesla’s Services and Other segment are pegged at $1,742 million and $1,954.30 million, respectively, implying growth from $1,466 million recorded in the same quarter of 2022.
What Does Our Model Say?
Our proven model predicts an earnings beat for Tesla this time around. The combination of a positiveEarnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is the case here, as you will see below.
Earnings ESP: Tesla has an Earnings ESP of +2.41%. This is because the Most Accurate Estimate is pegged 2 cents higher than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Tesla currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Other Stocks With the Favorable Combination
Here are a few other players from the auto space that, according to our model, have the right combination of elements to post an earnings beat for the quarter to be reported:
Genuine Parts Company will release second-quarter 2023 results on Jul 20. The company has an Earnings ESP of +0.79% and a Zacks Rank #2.
The Zacks Consensus Estimate for Genuine Parts’ to-be-reported quarter’s earnings and revenues is pegged at $2.31 per share and $5.95 billion, respectively. GPC surpassed earnings estimates in all of the trailing four quarters, the average surprise being 8.15%.
General Motors Company will release second-quarter 2023 results on Jul 25. The company has an Earnings ESP of +9.37% and a Zacks Rank #3.
The Zacks Consensus Estimate for General Motors’ to-be-reported quarter’s earnings and revenues is pegged at $1.66 per share and $42.46 billion, respectively. GM surpassed earnings estimates in three of the trailing four quarters and missed once, the average surprise being 15.50%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Genuine Parts Company (GPC) : Free Stock Analysis Report
Cummins Inc. (CMI) : Free Stock Analysis Report
GoPro, Inc. (GPRO) : Free Stock Analysis Report
General Motors Company (GM) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
