) is set to report second-quarter 2014 results on Jul 28, 2014.
Last quarter, it posted a surprise of +9.58%. Let's see how things
are shaping up for this announcement.
Factors to Consider This Quarter
For 2014, Cummins increased the revenue guidance to 6-10% based on
increased demand, particularly in North America. The company
expects launch of new and innovative products to enhance
profitability. Moreover, Cummins is focused on enhancing
shareholders value by pursuing aggressive share repurchases and
increasing dividend payouts. Cummins' board authorized a share
repurchase of up to $1 billion and announced a 25% increase in
dividends to 78 cents.
However, weakness in the operating markets is considerably
affecting the results of Cummins. The company is witnessing a
challenging situation in India and Brazil because of weak economic
conditions. In 2014, the company expects total revenue in India to
decline 8%. Revenues in Brazil are expected to decline 15% this
year due to weak truck demand.
Our proven model does not conclusively show that Cummins is likely
to beat earnings this quarter. That is because a stock needs to
have both a positive
and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the
case here as you will see below.
Earnings ESP represent the difference between the Most Accurate
estimate and the Zacks Consensus Estimate. Cummins' Most Accurate
estimate stands at $2.34 while the Zacks Consensus Estimate is
pegged at $2.39. Hence, the difference stands at -2.09% for the
Cummins' Zacks Rank #2 (Buy) when combined with a negative ESP,
makes surprise prediction difficult.
We caution against stocks with Zacks #4 and #5 Ranks (Sell rated
stocks) going into the earnings announcement, especially when the
company is seeing a negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model
shows that they have the right combination of elements to post an
earnings beat this quarter:
Meritor, Inc. (
) has an earnings ESP of +13.33% and a Zacks Rank #2. The company
will be reporting second-quarter earnings on Jul 31, 2014.
BorgWarner Inc. (
), with an earnings ESP of +1.15% and a Zacks Rank #2, will be
reporting second-quarter earnings on Jul 31, 2014.
American Axle & Manufacturing Holdings Inc. (
) has an earnings ESP of +8.45% and a Zacks Rank #2. The company
will release its second-quarter financial results on Aug 1,
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