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Cummins (CMI) to Report Q3 Earnings: Is a Beat in the Cards?

Cummins Inc. CMI is expected to report third-quarter 2017 results, before market open on Oct 31. Last quarter, the company delivered a negative earnings surprise of 1.9%. However, the company beat estimates in three of the trailing four quarters, with an average beat of 11.1%.

The long-term EPS growth (three to five years) for the company is currently pegged at 12%.

Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Cummins is likely to beat estimates this quarter. This is because it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — which is needed for increasing the odds of an earnings beat.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

Zacks ESP: The Earnings ESP for Cummins is +0.63% because the Most Accurate Estimate of $2.49 is pegged above the Zacks Consensus Estimate of $2.47. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Cummins currently carries a Zacks Rank #2 (Buy).

Factors to Drive Better-than-Expected Results

For 2017, Cummins has bullish outlook on revenues from different segments. The company projects revenues to grow 9-11%, whereas the prior guidance was 4-6%.

Revenues from the Components segment are expected to increase 6-10% due to stronger-than-anticipated demand in the China truck market and improved outlook for the North American heavy- and medium-duty truck market.

At the Distribution segment, revenues for 2017 are expected to rise 4-6%, up from the prior guidance of flat to 4% increase. For 2017, the Power Systems segment revenues are projected to increase 1-5%, up from the previous guidance of flat to down 4%. The raised guidance can be attributed to increased customer demand from mining, and oil and gas engines in addition to higher parts sales.

For the Engine segment, the company expects revenues to be up 2-6%, up from the previous guidance of down 3-6% due to improved outlook in most of the markets.

Net sales from the Components segment came in at $1.45 in second-quarter 2017. The Zacks Consensus Estimate for net sales from this segment in third-quarter 2017 is $1.39 billion.

Net sales from the Power Generation segment came in at $570 million in second-quarter 2017. The Zacks Consensus Estimate for net sales from this segment in third-quarter 2017 is $962 million.

Stocks to Consider

Here are some other stocks you may want to consider, as according to our model they have the right combination of elements to post an earnings beat this quarter.

CNH Industrial N.V. CNHI has an Earnings ESP of +8.11% and a Zacks Rank of 2. The company is expected to report third-quarter 2017 results on Oct 31. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Horizon Global Corporation HZN has an Earnings ESP of +5.82% and a Zacks Rank #3. The company’s third-quarter 2017 financial results are expected to release on Oct 31.

Meritor, Inc. MTOR has an Earnings ESP of +4.26% and a Zacks Rank of 1. The company is expected to release fourth-quarter 2017 results on Nov 15.

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