Why an Earnings Surprise is Likely for Cummins (CMI) in Q2

Cummins Inc. CMI is slated to release second-quarter 2022 results on Aug 2, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings and revenues is pegged at $4.37 per share and $6.48 billion, respectively.

The Zacks Consensus Estimate for Cummins’ second-quarter earnings per share has been revised downward by 10 cents in the past 30 days. The bottom-line projection, however, implies year-over-year growth of 5.3%. The top-line projection implies a year-over-year increase of 6%.

Cummins posted better-than-expected earnings in the last reported quarter on the back of higher-than-anticipated EBITDA in the Engine segment. Over the trailing four quarters, Cummins beat earnings estimates on two occasions for as many misses, with the average negative surprise being 0.24%.

Let’s see how things have shaped up prior to second-quarter 2022 results.

Cummins Inc. Price and EPS Surprise

Cummins Inc. price-eps-surprise | Cummins Inc. Quote

Earnings Whispers

Our proven model predicts an earnings beat for Cummins for the to-be-reported quarter, as it has the right combination of the two key ingredients. A combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: Cummins has an Earnings ESP of +0.09%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cummins currently carries a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors at Play

Technology leadership, impressive product portfolio, strong geographic diversification and broad global distribution network are expected to aid Cummins’ second-quarter 2022 results. Higher year-over-year demand for Cummins’ products in North America and international markets is likely to have aided revenues during the to-be-reported quarter. Yet, high commodity, labor and logistics costs are likely to have clipped margins. Also, high capex and R&D expenses incurred by Cummins in an effort to ramp up its capabilities in fuel cell and hydrogen production technology are anticipated to have acted as a spoilsport.

Here’s a rundown of second-quarter revenue and EBITDA estimates for Cummins’ segments.

The Zacks Consensus Estimate for Cummins’ Engine segment’s quarterly net sales is pegged at $2,665 million, suggesting an increase from the year-ago quarter’s $2,491 million. However, the consensus mark for EBITDA is $381 million, implying a year-over-year decline of 5.2%.

For the quarter ended June, the Zacks Consensus Estimate for the Distribution segment’s net sales is $2,110 million, indicating an uptick from $1,920 million generated in the comparable year-ago quarter. The same for the segment’s EBITDA is $217 million, indicating an increase from the year-ago reported figure of $201 million.

For the quarter under discussion, the Zacks Consensus Estimate for net sales from the Power System segment is $1,213 million, suggesting growth from $1,143 million recorded in second-quarter 2021. The consensus mark for the segment’s EBITDA is $136 million, implying a decrease from $139 million reported in the corresponding quarter of 2021.

The Zacks Consensus Estimate of $2,063 million for the Components segment’s quarterly net sales calls for an increase from the year-ago quarter’s $1,994 million. The consensus estimate for the segment’s EBITDA is $329 million, which indicates a rise from $301 million recorded in first-quarter 2021.

For the New Power Segment, the consensus estimate for revenues is $48 million, indicating a rise from $24 million recorded in the corresponding quarter of 2021. The consensus mark for pretax loss is pegged at $73 million, indicating a deterioration from the year-ago reported loss of $60 million.

Other Stocks With Favorable Combination

Here are a few other stocks in the auto sector that are worth considering, as these too have the right combination of elements to come up with an earnings beat this time around:

Allison Transmission ALSN has an Earnings ESP of +0.28% and a Zacks Rank #3. The stock is set to report second-quarter 2022 earnings on Aug 3.

The Zacks Consensus Estimate for Allison’s to-be-reported quarter’s earnings and revenues is pegged at $1.35 per share and $698 million, respectively. Encouragingly, ALSN surpassed earnings estimates in the last four quarters, with the average being 11.7%.

Rivian Automotive RIVN has an Earnings ESP of +9.58% and a Zacks Rank #3. The stock is set to report second-quarter 2022 earnings on Aug 11.

The Zacks Consensus Estimate for Rivian’s to-be-reported quarter’s bottom and top line is pegged at a loss of $1.67 per share and $337.7 million, respectively. Over the trailing three quarters, Rivian has outpaced earnings estimates twice and missed once, the average negative surprise being 4.52%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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