Results: Cummins Inc. Beat Earnings Expectations And Analysts Now Have New Forecasts

It's been a good week for Cummins Inc. (NYSE:CMI) shareholders, because the company has just released its latest quarterly results, and the shares gained 7.8% to US$355. It looks like a credible result overall - although revenues of US$8.5b were what the analysts expected, Cummins surprised by delivering a (statutory) profit of US$5.86 per share, an impressive 21% above what was forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Cummins

Following last week's earnings report, Cummins' 20 analysts are forecasting 2025 revenues to be US$34.7b, approximately in line with the last 12 months. Per-share earnings are expected to jump 43% to US$21.88. Before this earnings report, the analysts had been forecasting revenues of US$34.6b and earnings per share (EPS) of US$21.77 in 2025. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

With the analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 5.2% to US$349. It looks as though they previously had some doubts over whether the business would live up to their expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values Cummins at US$425 per share, while the most bearish prices it at US$275. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Cummins shareholders.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. We would highlight that Cummins' revenue growth is expected to slow, with the forecast 1.1% annualised growth rate until the end of 2025 being well below the historical 11% p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 3.1% annually. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Cummins.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Cummins analysts - going out to 2026, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Cummins , and understanding them should be part of your investment process.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.