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Why Is Cummins (CMI) Up 5.2% 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 added about 5.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Cummins Q2 Earnings Beat Estimates, Down Y/Y
Cummins reported second-quarter 2020 earnings of $1.95 per share, which surpassed the Zacks Consensus Estimate of $0.85. Higher-than-expected contribution from Distribution, Engine and Power Systems segments led to the outperformance. EBITDA from the said segments came in at $160 million, $150 million and $91 million, which topped the consensus mark of $101 million, $85 million and $76 million, respectively.
The bottom line, however, declined from second-quarter 2019 earnings of $4.27 a share amid coronavirus woes. Cummins’ revenues also declined 38% year over year to $3,852 million. However, revenues beat the Zacks Consensus Estimate of $3,569 million.
Key Takeaways
Sales for the Engine segment declined 47.3% year over year to $1,423 million. The segment’s EBITDA declined to $150 million (accounting for 10.5% of sales) from $416 million (15.4% of sales) a year ago. Decline in global demand in truck and construction markets resulted in lower on- and off-highway revenues than the prior-year quarter. Sales slid in all regions served, apart from China.
Sales for the Distribution segment totaled $1,605 million, down 20.8% year over year. Revenues from North America declined 25% and international sales were down 12% from the year-ago quarter. The segment’s EBITDA fell to $160 million (10% of sales) from $172 million (8.5% of sales) a year ago amid lower demand and unfavorable forex translations.
Sales for the Components segment declined 37.7% from the prior-year quarter to $1,150 million. The segment’s EBITDA was $141 million (12.3% of sales) compared with the year-ago figure of $297 million (16.1% of sales). Sales in North America and international markets declined 55% and 9% year over year, respectively. Weak demand in Brazil, Europe and India weighed on international sales. Nonetheless, sales surged 63% year over year in China on the back of record level of truck production.
Sales for the Power Systems segment declined 35.4% from the year-ago quarter to $777 million. The segment’s second-quarter 2020 EBITDA declined to $91 million (11.7% of sales) from $173 million (14.4% of sales) in the year-ago period. Power generation and industrial revenues fell 37% and 33%, respectively, from a year ago. Lower demand in mining and oil/gas markets weighed on the segment’s sales.
Sales for the New Power segment were $10 million. The segment recorded EBITDA of negative $38 million amid high product and technology-related expenses.
Cummins’ cash and cash equivalents were $1,751 million as of Jun 28, 2020, up from $1,129 million on Dec 31, 2019. Long-term debt totaled $1,639 million, up from $1,576 million on Dec 31, 2019.
While the firm expects third-quarter sales to improve sequentially, coronavirus-led uncertainty still looms large. On account of this, Cummins refrained from providing any forecast for full-year 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 53.49% due to these changes.
VGM Scores
Currently, Cummins has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cummins has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Why Is Cummins (CMI) Up 5.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Cummins (CMI - Free Report) . Shares have added about 5.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Cummins Q2 Earnings Beat Estimates, Down Y/Y
Cummins reported second-quarter 2020 earnings of $1.95 per share, which surpassed the Zacks Consensus Estimate of $0.85. Higher-than-expected contribution from Distribution, Engine and Power Systems segments led to the outperformance. EBITDA from the said segments came in at $160 million, $150 million and $91 million, which topped the consensus mark of $101 million, $85 million and $76 million, respectively.
The bottom line, however, declined from second-quarter 2019 earnings of $4.27 a share amid coronavirus woes. Cummins’ revenues also declined 38% year over year to $3,852 million. However, revenues beat the Zacks Consensus Estimate of $3,569 million.
Key Takeaways
Sales for the Engine segment declined 47.3% year over year to $1,423 million. The segment’s EBITDA declined to $150 million (accounting for 10.5% of sales) from $416 million (15.4% of sales) a year ago. Decline in global demand in truck and construction markets resulted in lower on- and off-highway revenues than the prior-year quarter. Sales slid in all regions served, apart from China.
Sales for the Distribution segment totaled $1,605 million, down 20.8% year over year. Revenues from North America declined 25% and international sales were down 12% from the year-ago quarter. The segment’s EBITDA fell to $160 million (10% of sales) from $172 million (8.5% of sales) a year ago amid lower demand and unfavorable forex translations.
Sales for the Components segment declined 37.7% from the prior-year quarter to $1,150 million. The segment’s EBITDA was $141 million (12.3% of sales) compared with the year-ago figure of $297 million (16.1% of sales). Sales in North America and international markets declined 55% and 9% year over year, respectively. Weak demand in Brazil, Europe and India weighed on international sales. Nonetheless, sales surged 63% year over year in China on the back of record level of truck production.
Sales for the Power Systems segment declined 35.4% from the year-ago quarter to $777 million. The segment’s second-quarter 2020 EBITDA declined to $91 million (11.7% of sales) from $173 million (14.4% of sales) in the year-ago period. Power generation and industrial revenues fell 37% and 33%, respectively, from a year ago. Lower demand in mining and oil/gas markets weighed on the segment’s sales.
Sales for the New Power segment were $10 million. The segment recorded EBITDA of negative $38 million amid high product and technology-related expenses.
Cummins’ cash and cash equivalents were $1,751 million as of Jun 28, 2020, up from $1,129 million on Dec 31, 2019. Long-term debt totaled $1,639 million, up from $1,576 million on Dec 31, 2019.
While the firm expects third-quarter sales to improve sequentially, coronavirus-led uncertainty still looms large. On account of this, Cummins refrained from providing any forecast for full-year 2020.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 53.49% due to these changes.
VGM Scores
Currently, Cummins has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cummins has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.