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Want To Invest In Cummins Inc (NYSE:CMI)? Here’s How It Performed Lately

For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Cummins Inc (NYSE:CMI) useful as an attempt to give more color around how Cummins is currently performing. Check out our latest analysis for Cummins

How Well Did CMI Perform?

I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique enables me to assess different companies on a similar basis, using the latest information. For Cummins, its most recent earnings (trailing twelve month) is US$999.00M, which, in comparison to the previous year’s figure, has declined by -28.34%. Given that these values may be fairly myopic, I have created an annualized five-year value for Cummins’s net income, which stands at US$1.54B This doesn’t seem to paint a better picture, as earnings seem to have gradually been falling over the longer term.

NYSE:CMI Income Statement Feb 18th 18
NYSE:CMI Income Statement Feb 18th 18

What could be happening here? Let’s examine what’s occurring with margins and whether the whole industry is facing the same headwind. Revenue growth in the last few years, has been positive, nevertheless earnings growth has been declining. This implies that Cummins has been ramping up expenses, which is hurting margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the US machinery industry has been growing its average earnings by double-digit 18.72% in the previous twelve months, and a more muted 3.59% over the past five. This shows that any tailwind the industry is enjoying, Cummins has not been able to reap as much as its industry peers.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Typically companies that experience an extended period of reduction in earnings are going through some sort of reinvestment phase with the aim of keeping up with the latest industry growth and disruption. I recommend you continue to research Cummins to get a more holistic view of the stock by looking at:

  • 1. Future Outlook: What are well-informed industry analysts predicting for CMI’s future growth? Take a look at our free research report of analyst consensus for CMI’s outlook.

  • 2. Financial Health: Is CMI’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

  • 3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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