Cummins (CMI) To Post Q2 Earnings: Is A Beat In The Cards?
Zacks Investment Research | Jul 24, 2019 09:38PM ET
Cummins Inc. (NYSE:CMI) is scheduled to release second-quarter 2019 earnings on Jul 30, before market open. In the last reported quarter, the company delivered positive earnings surprise of 19.66%. In fact, the company’s earnings surpassed estimates in three of the trailing four quarters, at an average beat of 7.89%.
In the past three months, shares of Cummins have outperformed the Earnings ESP Filter .
Zacks Rank: The company currently carries a Zacks Rank #3, which along with a positive Earnings ESP makes surprise prediction possible.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.
Factors Likely to Influence Q2
Cummins is gaining from acquisitions. The company recently announced its definite agreement to acquire the outstanding shares of fuel cell systems provider, Hydrogenics Corporation. This is expected to position the company as a leader in electric power. Further, Cummins’ focus on introducing innovative products and strategies, such as the recent partnership with Isuzu to develop diesel-based powertrains, is expected to drive revenues in the quarter to be reported.
The company is witnessing improvement in manufacturing supply chain performance, courtesy of reduction in material costs and lower tariff. This is likely to offset higher variable compensation expenses and drive EBITDA margin. For 2019, EBITDA margin is expected in the range of 16.25-16.75% compared with previous year’s guidance of 16%.
The company focuses on improving cycle-over-cycle earnings, increasing operating cash flow, delivering first quartile ROIC, returning cash to shareholders as well as investing in products and services to deliver growth. These factors are makes likely to enable the company to post earnings beat in the upcoming quarterly results.
In all its segments, Cummins has been enjoying growth in the North American market. Improved power generated equipment, higher truck production and rising sales have encouraged the company to raise the industry outlook for 2019. In the medium-duty truck market, industry production is expected to witness an increase of 6% year over year to 140,000 units. Further, the market share is expected in the range of 74-76%.
However, higher expenses stemming from rising R&D and material costs are a concern. In the second quarter, the expenses are expected to increase, thanks to the launch of on-highway products that comply with emission regulation standard.
Other Stocks to Consider
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Here are some other auto stocks worth considering, which also have the right combination of elements to deliver an earnings beat this time around:
Dana Incorporated (NYSE:DAN) has an Earnings ESP of +0.45% and carries a Zacks Rank #3. It is slated to release second-quarter 2019 results on Jul 31. You can see Original post
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