Yahoo Finance Why Is Cummins (CMI) Down 8.9% Since Last Earnings Report?
It has been about a month since the last earnings report for Cummins (CMI). Shares have lost about 8.9% 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 the most recent earnings report in order to get a better handle on the important drivers.
Cummins Puts up a Stellar Q1 Show
Cummins reported first-quarter 2023 earnings of $5.55 per share, which reflects an improvement from the prior-year quarter earnings of $4.04 per share. The reported figure also surpassed the Zacks Consensus Estimate of $4.81. Higher-than-expected EBITDA in the Engine, Components, Distribution and Power Systems segments resulted in the outperformance. Cummins’ revenues totaled $8,453 million, up 32.3% from $6,385 million recorded in the year-ago quarter. The top line also beat the Zacks Consensus Estimate of $8,022 million.
Key Takeaways
In the reported quarter, sales in the Engine segment were up 8% year over year to $2,986 million. The metric topped the Zacks Consensus Estimate of $2,933 million. The segment’s EBITDA increased to $457 million (accounting for 15.3% of sales) from $390 million (14.2% of sales) and came ahead of the Zacks Consensus Estimate of $441 million. On-highway revenues climbed 9%, driven by pricing actions and strong demand in the North American truck markets, strong aftermarket demand and smart pricing actions. Off-highway revenues rose 6.2%. Sales increased 9% in North America and 8% in international markets.
Sales in the Distribution segment totaled $2,406 million, up 14% year over year and beat the consensus mark of $2,273 million. The segment’s EBITDA came in at $335 million (13.9% of sales), up from the previous year’s $110 million (5.2% of sales). Also, the metric surpassed the consensus mark of $209 million. Revenues from North America jumped 24%, while international sales plunged 5%. Higher revenues were driven by increased demand for parts and services and smart pricing actions.
Sales in the Components segment were up 79% from the prior-year quarter to $3,557 million and surpassed the consensus mark of $3,237 million. Sales in North America were up 87%, while the same in international markets increased 69%, thanks to the Meritor buyout. The segment’s EBITDA was $507 million (14.3% of sales) compared with the year-ago figure of $320 million (16.1% of sales). The metric surpassed the Zacks Consensus Estimate of $472 million.
Sales in the Power Systems segment rose 16% from the year-ago quarter to $1,343 million, topping the consensus mark of $1,306 million. The segment’s EBITDA increased to $219 million (13.9% of sales) from $90 million (7.8% of sales) and beat the consensus mark of $160 million. Power generation and industrial revenues were up 16%.
Sales in the Accelera segment came in at $85 million, soaring 174% from the year-ago level and outperforming the consensus metric of $68 million. The segment incurred a pretax loss of $94 million, which was wider than the consensus mark of $68 million.
Financials
Cummins’ cash and cash equivalents were $1,980 million as of Mar 31, 2023, down from $2,101 million on Dec 31, 2022. Long-term debt totaled $4,409 million, down from $4,498 million on Dec 31, 2022.
2023 Outlook Lifted
Cummins now expects revenues to grow in the range of 15-20% year over year, up from the prior projection of 12. EBITDA is forecast to be in the range of 15-15.7% of sales, higher than the previous forecast of 14.5%-15.2%. Cummins continues to stick to its plan of returning nearly 50% of its operating cash flow to shareholders in the form of dividends and share repurchases.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Cummins has a nice Growth Score of B, a grade with the same score on the momentum front. 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 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 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 Inc. (CMI) : Free Stock Analysis Report
