Cummins, Inc. (CMI) recently spiked into a new high after reporting strong Q1 results that included a 22% earnings surprise. With an average earnings surprise of 16% over the last four quarters and a bullish growth projection, this Zacks #1 rank stock offers another gear for momentum.
Company Description
Cummins, Inc. designs, manufactures and sells diesel and natural gas engines and engine components worldwide. The company was founded in 1919 and has a market cap of $23 billion.
CMI has had an incredible run over the last year, posting huge gains as the global economy continues to recover. But shares got an extra boost on April 26 after the company reported strong Q1 results that came in well ahead of expectations.
First-Quarter Results
Revenue for the period was up 56% from last year to $3.9 billion. Earnings also came in strong at $1.75, 22% ahead of the Zacks Consensus Estimate, where the company has an average earnings surprise of 16% over the last four quarters.
Although Cummins saw strength across its different segments, its Engine segment, also its largest, was the leader of the pack, with sales up 68% from last year to $2.4 billion. Within its Engine segment, medium-duty truck engine shipments were up 114%.
Financial Profile
Moving forward, Cummins will benefit from its strong balance sheet, with cash and short-term investments of $1.1 billion against total debt of just $767 million.
Estimates
We saw some solid movement in estimates off the good quarter, with the current year up 65 cents to $7.87 while the next-year estimate jumped 71 cents to $9.44, a bullish 20% growth projection.
Valuation
But in spite of the recent gains, the valuation picture still looks solid, with a forward P/E of 15X in line with its peers. Its PEG ratio (PE/Growth) of .75 is well below the traditional benchmark for value of 1.
12-Month Chart
On the chart, CMI had been showing some signs of short-term weakness before jumping into a new all-time high on the good quarter. Look for support from the long-term trend on any weakness. Take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Momentum Trader Service.
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