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What's in Store for Cummins (CMI) This Earnings Season?

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Cummins Inc. CMI is slated to release second-quarter 2021 results on Aug 3, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings is pegged at $4.06 per share on revenues of $6.11 billion.

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

Over the trailing four quarters, Cummins beat estimates on all occasions, the average surprise being 54.2%. 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’ second-quarter earnings per share has been revised upward by two cents to $4.06 in the past 30 days. Moreover, this compares favorably with the year-ago quarter’s $1.95 per share. Also, the Zacks Consensus Estimate for revenues suggests a year-over-year rise of 58.6%.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Cummins for the to-be-reported quarter, as it does not have the right combination of the two key ingredients. A 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, this is not the case as elaborated below.

Earnings ESP: Cummins has an Earnings ESP of -1.15%. This is because the Most Accurate Estimate of $4.01 per share comes in five 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 carries a Zacks Rank of 3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Key Factors

Cummins’ second-quarter top and bottom lines are likely to have benefited from the sustained recovery of the auto sector from the pandemic-induced disruptions. In fact, robust revenues across all major segments of the company are likely to have boosted its quarterly performance.

Notably, the Zacks Consensus Estimate for the Engine segment’s quarterly net sales is pegged at $2,502 million, suggesting a jump from the year-ago period’s $1,423 million. The EBITDA for the segment is estimated at $362 million, calling for a whopping 141.3% rise on a year-on-year basis.

For the June-end quarter, the Zacks Consensus Estimate for the Distribution segment’s net sales is pinned at $1,928 million, indicating an increase from the year-ago period’s $1,605 million. The EBITDA for the segment is estimated at $163 million, calling for a rise from the $160 million seen in the prior-year quarter.

For the quarter under discussion, the Zacks Consensus Estimate for the Power System segment’s net sales is pinned at $1,086 million, suggesting a jump from the year-earlier period’s $777 million. The consensus mark for the segmental EBITDA is $124 million, indicating an improvement from the year-ago period’s $91 million.

The Zacks Consensus Estimate of $2,042 million for the Components segment’s quarterly net sales calls for a rise from the year-ago quarter’s $1,150 million. The same for the segment’s EBITDA is $350 million, indicating growth from the year-ago period’s $141 million.

The consensus mark for the New Power segment’s to-be-reported quarter net sales is pegged at $24.25 million, suggesting solid growth from the year-ago period figure of $10 million.

However, the consensus mark for the New Power segment’s to-be-reported quarter EBITDA is pegged at a loss of $47.9 million, suggesting wider losses than the year-ago period’s $38 million. Also, Cummins’ soaring research and development and engineering expenses for the New Power segment might have further hurt its bottom line during the quarter under discussion. Besides, rising capital expenditure for the development of technically-enhanced components is expected to have dented the company’s cash flows and overall margins during the June-end quarter. Apart from this, supply-chain inefficiencies, labor shortages and logistical bottlenecks are likely to have put pressure on the firm’s margins during the quarter.

Stocks With Favorable Combinations

Here are a few stocks in the auto sector which are worth considering, as these have the right combination of elements to come up with an earnings beat this time around:

General Motors GM has an Earnings ESP of +19.83% and flaunts a Zacks Rank #1, at present. It is scheduled to report earnings results on Aug 4.

Tenneco TEN has an Earnings ESP of +1.2% and currently carries a Zacks Rank #3. The company is slated to release quarterly numbers on Aug 5.

Lear Corporation LEA has an Earnings ESP of +3.05% and carries a Zacks Rank of 3, currently. The company is set to announce second-quarter figures on Aug 6.


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Cummins Inc. (CMI) : Free Stock Analysis Report

Tenneco Inc. (TEN) : Free Stock Analysis Report

General Motors Company (GM) : Free Stock Analysis Report

Lear Corporation (LEA) : Free Stock Analysis Report

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