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Cummins (CMI) Up 1.6% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Cummins (CMI - Free Report) . Shares have added about 1.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cummins due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Cummins Delivers Comprehensive Beat in Q2
Cummins reported second-quarter 2021 earnings of $4.15 per share, surpassing the Zacks Consensus Estimate of $4.06 and surging from $1.95 recorded in the year-ago period. Higher-than-expected sales and EBITDA from the Power Systems segment led to this outperformance. Cummins’ revenues increased 59% year over year to $6,111 million. The reported figure also beat the Zacks Consensus Estimate of $6,107.5 million.
Key Takeaways
For the reported quarter, sales for the Engine segment were up 75% year over year to $2,491 million. The segment’s EBITDA rose to $402 million (accounting for 16.1% of sales) from the prior year’s $150 million (10.5% of sales). On-highway revenues climbed 104% and off-highway revenues increased 10% from the prior-year quarter. Sales jumped 104% and 26% in North America and international markets, respectively.
Sales for the Distribution segment totaled $1,920 million, up 20% year over year. Revenues from North America edged up 18% and international sales increased 22% from the year-ago quarter. The segment’s EBITDA came in at $201 million (10.5% of sales), up from the previous year’s $160 million (10% of sales). This was on account of increased demand in power generation and engine markets.
Sales for the Components segment jumped 73% from the prior-year quarter to $1,994 million. The segment’s EBITDA was $301 million (15.1% of sales) compared with the year-ago figure of $141 million (12.3% of sales). Sales in North America markets surged 108%, while international sales soared 46% year over year.
Sales for the Power Systems segment rose 47% from the year-ago quarter to $1,143 million. The reported figure also surpassed the consensus mark of $1,086 million. The segment’s EBITDA increased to $139 million (12.2% of sales) from $91 million (11.7% of sales) registered in the year-ago period and topped the consensus mark of $124 million. Power generation and industrial revenues rose 54% and 37%, respectively, from the prior year. Stronger demand in mining markets aided the segment’s sales.
Sales for the New Power segment came in at $24 million, marking a whopping 140% rise year on year. This was chiefly driven by surging demand in transit and school bus markets along with the commissioning of electrolyzer projects. The segment recorded EBITDA of negative $60 million amid high product and technology-related expenses.
Cummins’ cash and cash equivalents were $2,481 million as of Jul 4, 2021, down from $3,401 million on Dec 31, 2020. Long-term debt totaled $3,620 million, up from $3,610 million on Dec 31, 2020.
2021 View
Cummins has reaffirmed its full-year 2021 revenue guidance. The top line is expected to grow 20-24% year over year. EBITDA is envisioned in the range of 15.5-16% of sales. The company anticipates returning 75% of operating cash flow to shareholders in the form of dividends and share repurchases in 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Cummins has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Cummins has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Cummins (CMI) Up 1.6% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Cummins (CMI - Free Report) . Shares have added about 1.6% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cummins due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Cummins Delivers Comprehensive Beat in Q2
Cummins reported second-quarter 2021 earnings of $4.15 per share, surpassing the Zacks Consensus Estimate of $4.06 and surging from $1.95 recorded in the year-ago period. Higher-than-expected sales and EBITDA from the Power Systems segment led to this outperformance. Cummins’ revenues increased 59% year over year to $6,111 million. The reported figure also beat the Zacks Consensus Estimate of $6,107.5 million.
Key Takeaways
For the reported quarter, sales for the Engine segment were up 75% year over year to $2,491 million. The segment’s EBITDA rose to $402 million (accounting for 16.1% of sales) from the prior year’s $150 million (10.5% of sales). On-highway revenues climbed 104% and off-highway revenues increased 10% from the prior-year quarter. Sales jumped 104% and 26% in North America and international markets, respectively.
Sales for the Distribution segment totaled $1,920 million, up 20% year over year. Revenues from North America edged up 18% and international sales increased 22% from the year-ago quarter. The segment’s EBITDA came in at $201 million (10.5% of sales), up from the previous year’s $160 million (10% of sales). This was on account of increased demand in power generation and engine markets.
Sales for the Components segment jumped 73% from the prior-year quarter to $1,994 million. The segment’s EBITDA was $301 million (15.1% of sales) compared with the year-ago figure of $141 million (12.3% of sales). Sales in North America markets surged 108%, while international sales soared 46% year over year.
Sales for the Power Systems segment rose 47% from the year-ago quarter to $1,143 million. The reported figure also surpassed the consensus mark of $1,086 million. The segment’s EBITDA increased to $139 million (12.2% of sales) from $91 million (11.7% of sales) registered in the year-ago period and topped the consensus mark of $124 million. Power generation and industrial revenues rose 54% and 37%, respectively, from the prior year. Stronger demand in mining markets aided the segment’s sales.
Sales for the New Power segment came in at $24 million, marking a whopping 140% rise year on year. This was chiefly driven by surging demand in transit and school bus markets along with the commissioning of electrolyzer projects. The segment recorded EBITDA of negative $60 million amid high product and technology-related expenses.
Cummins’ cash and cash equivalents were $2,481 million as of Jul 4, 2021, down from $3,401 million on Dec 31, 2020. Long-term debt totaled $3,620 million, up from $3,610 million on Dec 31, 2020.
2021 View
Cummins has reaffirmed its full-year 2021 revenue guidance. The top line is expected to grow 20-24% year over year. EBITDA is envisioned in the range of 15.5-16% of sales. The company anticipates returning 75% of operating cash flow to shareholders in the form of dividends and share repurchases in 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Cummins has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Cummins has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.