Cummins Earnings Preview: Another Surge in EPS and Sales Expected (CMI)

Cummins CMI is scheduled to report first-quarter 2011 results before Tuesday's opening bell. Analysts are looking for the Indiana-based maker of engines and power generators to post earnings of $1.44 per share. That is a jump from per-share earnings of $0.75 in the same period of last year. The consensus estimate for the most recent quarter has risen from $1.40 per share 90 days ago. First-quarter revenues are forecast to have surged as well: 45.5% year-over-year to $3.6 billion. This is for the three months in which Cummins sold its exhaust business, announced a $1 billion share repurchase program, and saw its agreement to supply mobile power generators to the U.S. Army extended. Looking ahead, analysts thus far expect to see year-over-year growth of both earnings and revenue in the second quarter. Cummins earnings have grown in each of the past four quarters, as well as besting consensus forecasts in most recent reporting periods. Cummins posted record profits for 2010, due largely to international growth, especially in Brazil, China and India. Full-year sales were second only to 2008. Performance was strong in all its four segments: Engine, Power Generation, Components and Distribution. About half the company's revenues come from the Engine segment, which produces diesel and natural gas powered engines for trucks and other large and industrial vehicles. Major customers include Chrysler, Ford F, PACCAR PCAR and Volvo. Cummins shares are trading at 21.1x current 2011 earnings estimates; however, that is in line with the sector average. The long-term EPS growth forecast is 11.7%. Cummins also has a nice 25.9% return on equity. The stock has traded mostly between $100 and $110 since December. Though it has performed better than competitor Caterpillar CAT recently, CMI has underperformed the broader market.