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Cummins (CMI) Up 10.2% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Cummins (CMI - Free Report) . Shares have added about 10.2% in that time frame, outperforming 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 Q4 Earnings Miss Estimates, Revenues Rise Y/Y
Cummins reported fourth-quarter 2023 earnings of $4.14 per share, which declined from $4.52 per share recorded in the corresponding quarter of 2022. The bottom line also missed the Zacks Consensus Estimate of $4.41 per share. Cummins’ revenues totaled $8.54 billion, up from $7.77 billion recorded in the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $8.08 billion.
Key Takeaways
In the reported quarter, sales in the Engine segment were up 5% year over year to $2.8 billion. The metric topped our estimate of $2.76 billion. The outperformance was attributable to the increase in on-highway revenues, which increased 10% due to strong demand in the North American truck market and pricing actions. The segment’s EBITDA fell to $353 million (accounting for 12.7% of sales) from $362 million (13.7% of sales) and missed our estimate of $357.4 million.
Sales in the Distribution segment totaled $2.7 billion, up 17% year over year, beating our estimate of $2.52 billion. Higher sales in North America resulted in outperformance. Revenues in North America jumped 18%, while international sales rose 15%. The segment’s EBITDA came in at $269 million (9.9% of sales), up from the year-ago quarter’s $256 million (11% of sales). The metric, however, missed our estimate of $311.6 million.
Sales in the Components segment totaled $3.2 billion, up 3% from the prior-year quarter, but missed our estimate of $3.24 billion. Lower sales in North America resulted in the underperformance. Revenues in North America fell 2%. The segment’s EBITDA was $406 million (12.7% of sales), higher than the year-ago figure of $377 million (12.2% of sales). The metric missed our estimate of $499.1 million.
Sales in the Power Systems segment rose 8% from the year-ago quarter to $1.4 billion but lagged our estimate of $1.42 billion. A fall in industrial revenues resulted in the underperformance. The segment’s EBITDA fell to $182 million (12.7% of sales) from $185 million (14% of sales) and missed our estimate of $209.9 million.
Sales in the Accelera segment came in at $81 million, up 8% from the year-ago level but lagging our estimate of $120.2 million. The segment incurred a pretax loss of $121 million, which was wider than our estimate of $100.4 million. Costs associated with the development of electric powertrains, fuel cells and electrolyzers, as well as products to support battery electric vehicles, contributed to EBITDA losses.
Financials
Cummins’ cash and cash equivalents were $2.18 billion as of Dec 31, 2023, up from $2.1 billion on Dec 31, 2022. Long-term debt totaled $4.8 billion, up from $4.50 billion on Dec 31, 2022.
In the fourth quarter of 2023, Cummins increased its dividend to $1.68 per share, payable on Dec 7, 2023, to shareholders of record on Nov 24, 2023.
2024 Outlook
For full-year 2024, Cummins expects revenues to decline 2-5% year over year. EBITDA is forecasted to be in the range of 14.4-15.4% of sales. Cummins continues to stick to its plan of returning nearly 50% of its operating cash flow to shareholders in the form of dividends.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Cummins has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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 10.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Cummins (CMI - Free Report) . Shares have added about 10.2% in that time frame, outperforming 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 Q4 Earnings Miss Estimates, Revenues Rise Y/Y
Cummins reported fourth-quarter 2023 earnings of $4.14 per share, which declined from $4.52 per share recorded in the corresponding quarter of 2022. The bottom line also missed the Zacks Consensus Estimate of $4.41 per share. Cummins’ revenues totaled $8.54 billion, up from $7.77 billion recorded in the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $8.08 billion.
Key Takeaways
In the reported quarter, sales in the Engine segment were up 5% year over year to $2.8 billion. The metric topped our estimate of $2.76 billion. The outperformance was attributable to the increase in on-highway revenues, which increased 10% due to strong demand in the North American truck market and pricing actions. The segment’s EBITDA fell to $353 million (accounting for 12.7% of sales) from $362 million (13.7% of sales) and missed our estimate of $357.4 million.
Sales in the Distribution segment totaled $2.7 billion, up 17% year over year, beating our estimate of $2.52 billion. Higher sales in North America resulted in outperformance. Revenues in North America jumped 18%, while international sales rose 15%. The segment’s EBITDA came in at $269 million (9.9% of sales), up from the year-ago quarter’s $256 million (11% of sales). The metric, however, missed our estimate of $311.6 million.
Sales in the Components segment totaled $3.2 billion, up 3% from the prior-year quarter, but missed our estimate of $3.24 billion. Lower sales in North America resulted in the underperformance. Revenues in North America fell 2%. The segment’s EBITDA was $406 million (12.7% of sales), higher than the year-ago figure of $377 million (12.2% of sales). The metric missed our estimate of $499.1 million.
Sales in the Power Systems segment rose 8% from the year-ago quarter to $1.4 billion but lagged our estimate of $1.42 billion. A fall in industrial revenues resulted in the underperformance. The segment’s EBITDA fell to $182 million (12.7% of sales) from $185 million (14% of sales) and missed our estimate of $209.9 million.
Sales in the Accelera segment came in at $81 million, up 8% from the year-ago level but lagging our estimate of $120.2 million. The segment incurred a pretax loss of $121 million, which was wider than our estimate of $100.4 million. Costs associated with the development of electric powertrains, fuel cells and electrolyzers, as well as products to support battery electric vehicles, contributed to EBITDA losses.
Financials
Cummins’ cash and cash equivalents were $2.18 billion as of Dec 31, 2023, up from $2.1 billion on Dec 31, 2022. Long-term debt totaled $4.8 billion, up from $4.50 billion on Dec 31, 2022.
In the fourth quarter of 2023, Cummins increased its dividend to $1.68 per share, payable on Dec 7, 2023, to shareholders of record on Nov 24, 2023.
2024 Outlook
For full-year 2024, Cummins expects revenues to decline 2-5% year over year. EBITDA is forecasted to be in the range of 14.4-15.4% of sales. Cummins continues to stick to its plan of returning nearly 50% of its operating cash flow to shareholders in the form of dividends.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Cummins has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cummins has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.