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Why Is Cummins (CMI) Down 11.2% Since Last Earnings Report?
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A month has gone by since the last earnings report for Cummins (CMI - Free Report) . Shares have lost about 11.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cummins due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cummins' Q3 EPS Increases Y/Y But Misses Mark
Cummins reported third-quarter 2021 earnings of $3.61 per share, increasing from $3.57 recorded in the year-ago period but lagging the Zacks Consensus Estimate of $3.99. Weaker-than-expected contribution from Components and New Power segments led to this underperformance. Cummins’ revenues increased 16.6% year over year to $5,968 million. The reported figure, however, fell short of the Zacks Consensus Estimate of $5,999 million.
Key Takeaways
For the reported quarter, sales for the Engine segment were up 22% year over year to $2,578 million. The segment’s EBITDA increased to $391 million (accounting for 15.2% of sales) from the prior year’s $382 million (18.1% of sales). The metric also topped the Zacks Consensus Estimate of $377 million. On-highway revenues climbed 22% from the prior-year quarter on robust demand in the North America truck market. Off-highway revenues also grew 21% from the prior-year quarter backed by high demand in North America, Asia-Pacific and Europe construction markets. Sales rose 23% and 19% in North America and international markets, respectively, on a year-over-year basis.
Sales for the Distribution segment totaled $1,959 million, up 14% year over year. Revenues from North America edged up 10% and international sales soared 21% from the year-ago quarter. The segment’s EBITDA came in at $192 million (9.8% of sales), up from the previous year’s $182 million (10.6% of sales). The metric also outpaced the consensus mark of $175 million. This was on account of increased demand in power generation and engine markets.
Sales for the Components segment were up 16% from the prior-year quarter to $1,793 million. Sales in North America and international markets increased 21% and 11%, respectively, on a year-over-year basis. The segment’s EBITDA was $253 million (14.1% of sales) compared with the year-ago figure of $261 million (16.9% of sales). The metric, however, fell short of the Zacks Consensus Estimate of $315 million.
Sales for the Power Systems segment rose 19% from the year-ago quarter to $1,164 million. The segment’s EBITDA increased to $134 million (11.5% of sales) from $101 million (10.3% of sales) registered in the year-ago period and topped the consensus mark of $117 million. Power generation revenues rose 10% year over year, courtesy of solid demand from recreation vehicle and datacenter markets. Industrial revenues also surged 33% owing to stronger demand in mining markets.
Sales for the New Power segment came in at $23 million, marking an uptick of 28% 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 incurred a pretax loss of $58 million amid high product and technology-related expenses. The loss was wider than the consensus mark of $44.6 million.
Cummins’ cash and cash equivalents were $2,588 million as of Oct 3, 2021, down from $3,401 million on Dec 31, 2020. Long-term debt totaled $3,602 million, down from $3,610 million on Dec 31, 2020.
Revised 2021 View
Amid persistent supply chain disruptions and cost headwinds, Cummins has downwardly revised its full-year 2021 guidance. The top line is now expected to witness year-over-year growth of 20% versus the prior guided range of 20-24%. EBITDA is envisioned at 15% of sales, down from the previous forecast of 15.5-16% of sales. Nonetheless, the company has maintained its target to return 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 a downward trend in fresh estimates. The consensus estimate has shifted -20.37% due to these changes.
VGM Scores
At this time, Cummins has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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. It's no surprise Cummins has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why Is Cummins (CMI) Down 11.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Cummins (CMI - Free Report) . Shares have lost about 11.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Cummins due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Cummins' Q3 EPS Increases Y/Y But Misses Mark
Cummins reported third-quarter 2021 earnings of $3.61 per share, increasing from $3.57 recorded in the year-ago period but lagging the Zacks Consensus Estimate of $3.99. Weaker-than-expected contribution from Components and New Power segments led to this underperformance. Cummins’ revenues increased 16.6% year over year to $5,968 million. The reported figure, however, fell short of the Zacks Consensus Estimate of $5,999 million.
Key Takeaways
For the reported quarter, sales for the Engine segment were up 22% year over year to $2,578 million. The segment’s EBITDA increased to $391 million (accounting for 15.2% of sales) from the prior year’s $382 million (18.1% of sales). The metric also topped the Zacks Consensus Estimate of $377 million. On-highway revenues climbed 22% from the prior-year quarter on robust demand in the North America truck market. Off-highway revenues also grew 21% from the prior-year quarter backed by high demand in North America, Asia-Pacific and Europe construction markets. Sales rose 23% and 19% in North America and international markets, respectively, on a year-over-year basis.
Sales for the Distribution segment totaled $1,959 million, up 14% year over year. Revenues from North America edged up 10% and international sales soared 21% from the year-ago quarter. The segment’s EBITDA came in at $192 million (9.8% of sales), up from the previous year’s $182 million (10.6% of sales). The metric also outpaced the consensus mark of $175 million. This was on account of increased demand in power generation and engine markets.
Sales for the Components segment were up 16% from the prior-year quarter to $1,793 million. Sales in North America and international markets increased 21% and 11%, respectively, on a year-over-year basis. The segment’s EBITDA was $253 million (14.1% of sales) compared with the year-ago figure of $261 million (16.9% of sales). The metric, however, fell short of the Zacks Consensus Estimate of $315 million.
Sales for the Power Systems segment rose 19% from the year-ago quarter to $1,164 million. The segment’s EBITDA increased to $134 million (11.5% of sales) from $101 million (10.3% of sales) registered in the year-ago period and topped the consensus mark of $117 million. Power generation revenues rose 10% year over year, courtesy of solid demand from recreation vehicle and datacenter markets. Industrial revenues also surged 33% owing to stronger demand in mining markets.
Sales for the New Power segment came in at $23 million, marking an uptick of 28% 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 incurred a pretax loss of $58 million amid high product and technology-related expenses. The loss was wider than the consensus mark of $44.6 million.
Cummins’ cash and cash equivalents were $2,588 million as of Oct 3, 2021, down from $3,401 million on Dec 31, 2020. Long-term debt totaled $3,602 million, down from $3,610 million on Dec 31, 2020.
Revised 2021 View
Amid persistent supply chain disruptions and cost headwinds, Cummins has downwardly revised its full-year 2021 guidance. The top line is now expected to witness year-over-year growth of 20% versus the prior guided range of 20-24%. EBITDA is envisioned at 15% of sales, down from the previous forecast of 15.5-16% of sales. Nonetheless, the company has maintained its target to return 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 a downward trend in fresh estimates. The consensus estimate has shifted -20.37% due to these changes.
VGM Scores
At this time, Cummins has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top quintile 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. It's no surprise Cummins has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.