Cummins (CMI) Shares Finish Week Up 12.76% on Solid Earnings

Cummins (NYSE:CMI) is representative of so many stocks since the turn of the year.  A broken down chart, the stock gapped up on the first day of the year as “risk on” came back to fruition, and has not really looked back since.  Any level of resistance was broken very easily, and the chart now already has 4(!) gaps in it since the turn of the year.  While those who are risk averse would have sat out the last gap as it was due to earnings, you can see a similar pattern in many similar industrial stocks.  That said, I hold Cummins in higher regard than most of its brethren, although sometimes it is lumped together.

But as a group they have been difficult to chase as so many provided no easy entry if you did not catch the initial burst, until late in January (after many had jumped 15-20%).  Further, most of these companies report in early to mid February so building a position ahead of a bipolar reaction is also not favorable.

A look at the last earnings report, from yesterday morning.

Via Zachs:

  • Cummins posted a profit of $548 million or $2.86 per share in the fourth quarter of 2011 compared with $362 million or $1.84 per share in the same quarter of 2010. Excluding special items, the company recorded a profit of $491 million or $2.56 per share, surpassing the Zacks Consensus Estimate of $2.24 per share.
  • Revenues in the quarter grew 19% to $4.9 billion driven by higher demand in trucks, construction, power generation and oil and gas markets in North America as well as strong growth in global mining markets. However, these were partially offset by weaker demand in the construction market in China and the same for power generation in India. Revenues were higher than the Zacks Consensus Estimate if $4.8 billion.

Sales by Segment

  • Sales in the Engine segment appreciated 23% to $3.1 billion. The increase in revenues was attributable to higher demand for on-highway heavy duty, midrange and light duty engines in North America and strong demand for oil and gas engines in North America and mining engines globally.
  • Sales in the Component segment escalated 19% to $1.1 billion driven by higher demand in North America, Europe, Indiaand Brazil that more than offset weaker demand in China.
  • Sales in the Power Generation segment inched up 2% to $920 million. The increase was driven by higher sales of commercial products due to stronger demand in most regions as well as higher demand in North America, China and Europe.
  • Sales in the Distribution segment scaled up 19% to $834 million driven by strong growth in Asia-Pacific region, higher demand for power generation in North America as well as in oil and gas and mining markets.

Guidance

  • Cummins anticipates revenues to go up by 10% in 2012. It also expects EBIT in the range of 14.5% to 15% of sales during the year. With this, the company expects to reach its target of achieving $30 billion in sales and 18% EBIT in 2015.

Competitors to Watch: Caterpillar Inc. (NYSE:CAT), Brunswick Corporation (NYSE:BC), Navistar Intl. Corp. (NYSE:NAV), Briggs & Stratton Corp. (NYSE:BGG), China Yuchai Intl. Ltd. (NYSE:CYD), PACCAR Inc (NASDAQ:PCAR), BorgWarner Inc. (NYSE:BWA), REGAL-BELOIT CORPORATION (NYSE:RBC), and Generac Holdings Inc. (NYSE:GNRC).

Disclosure Notice

Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). Trader Mark also authors the blog Market Montage.

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