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In March 2019, Cummins Inc. (NYSE:CMI) announced its most recent earnings update, which confirmed that the business benefited from a major tailwind, more than doubling its earnings from the prior year. Below, I’ve laid out key growth figures on how market analysts perceive Cummins’s earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
Market analysts’ consensus outlook for this coming year seems pessimistic, with earnings reducing by -1.3%. Over the medium term, earnings are expected to continue to be below today’s level, with a decline of -8.3% in 2021, eventually reaching US$2.3b in 2022.
While it’s useful to understand the growth each year relative to today’s value, it may be more insightful to analyze the rate at which the business is rising or falling every year, on average. The advantage of this method is that we can get a bigger picture of the direction of Cummins’s earnings trajectory over the long run, irrespective of near term fluctuations, fluctuate up and down. To compute this rate, I’ve inserted a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is -3.5%. This means that, we can anticipate Cummins will chip away at a rate of -3.5% every year for the next few years.
For Cummins, I’ve compiled three essential aspects you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is CMI worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CMI is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CMI? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.