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Factors Shaping the Fate of Cummins (CMI) This Earnings Season

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Cummins Inc. CMI is slated to release third-quarter 2021 results on Nov 2, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings is pegged at $3.99 per share on revenues of $6 billion.

The company delivered better-than-expected results in the last reported quarter on higher-than-anticipated contributions from the Power Systems segments.

Over the trailing four quarters, Cummins beat estimates on all occasions, the average surprise being 22.44%. This is depicted in the graph below:

Cummins Inc. Price and EPS Surprise

Cummins Inc. Price and EPS Surprise
Cummins Inc. Price and EPS Surprise

Cummins Inc. price-eps-surprise | Cummins Inc. Quote

Trend in Estimate Revisions

The Zacks Consensus Estimate for Cummins’ third-quarter earnings per share has been revised upward by 24 cents to $3.99 in the past 30 days. Moreover, this compares favorably with the year-ago quarter’s $3.57 per share. Also, the Zacks Consensus Estimate for revenues suggests a year-over-year rise of 17.21%.

Earnings Whispers

Our proven Zacks model does not conclusively predict an earnings beat for Cummins this time around. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. However, that is not the case here as elaborated below.

Earnings ESP: Cummins has an Earnings ESP of -1.48%. This is because the Most Accurate Estimate of $3.93 per share comes in 6 cents lower 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: Cummins, which shares space with other firms like Weichai Power Co. WEICY, Daimler AG DDAIF and PACCAR Inc. PCAR, carries a Zacks Rank of 4 (Sell) currently.

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

Key Factors

The Zacks Consensus Estimate for Cummins’ Engine segment’s quarterly net sales is pegged at $2,473 million, suggesting a fall from the previous quarter’s $2,491 million. For the September-end quarter, the Zacks Consensus Estimate for the Distribution segment’s net sales is pinned at $1,907 million, indicating a drop from the last quarter’s $1,920 million. The EBITDA for the Engine and Distribution segment is estimated at $377 million and $175 million, respectively, calling for a 6.2% and 13% fall, respectively, on a sequential basis.

For the quarter under discussion, the Zacks Consensus Estimate for the net sales from the Power System segment is pinned at $1,082 million, suggesting a dip from the previous quarter’s $1,143 million. The EBITDA for the segment is estimated at $117 million, calling for a decline from the $139 million reported in the last quarter.

Further, the Zacks Consensus Estimate of $1,928 million for the Components segment’s quarterly net sales calls for a decrease from the previous quarter’s $1,994 million.

Thus, the projected sequential decline in revenues across the Engine, Distribution, Components and Power System segments might have hurt the company’s performance during the quarter under review.

Additionally, the rising capex and R&D expenses incurred by Cummins’ in its efforts to ramp up its capabilities in fuel cell and hydrogen production technology are likely to have further dented the company’s margins during the September-end quarter.


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