Update Cummins (CMI) in my Jubak’s Picks portfolio

Cummins (CMI) has sold off today—the shares were down 4.3% at the close–after it reported earnings of $2.38 a share and revenue of $4.47 billion for the company’s first quarter.

Those earnings were 18 cents a share above the Wall Street consensus. Revenues were slightly above the Wall Street projection of $4.41 billion.

And the stock sold off?

Three reasons for that, I think.

First, normal sell-on-the-news profit taking. Shares of Cummins were up 32% for 2012 as of the close on April 30. (Cummins is a member of my Jubak’s Picks 12-18 month portfolio http://jubakpicks.com/the-jubak-picks/ .)

Second, a normal what-have-you-done-for-me-lately sell. Read more

Everybody “knows” that first quarter earnings growth for U.S. stocks will be anemic this year. The projection for year-to-year earnings growth on the Standard & Poor’s 500 stocks is just 0.93%, according to Standard & Poor’s Capital IQ. That compares to 19.68% earnings growth in the first quarter of 2011.

Logically this means stocks are headed for a correction as companies report their first quarter results beginning with Alcoa (AA).

“Logically,” that is, for most realms outside the stock market. In the logic of the stock market, however, the result is by no means so certain. What everyone knows is frequently discounted in share prices. But sometimes what everyone knows in his or her head isn’t really believed by investors. Intellectually, investors may know that projections for first quarter earnings growth are extremely low, but in their heart—and in their investment actions–they may remain much more optimistic. And, anyway, the earnings results of last quarter are history. For stock prices going forward, the important numbers are companies’ projections—guidance–for the second quarter and the rest of 2012. It’s expectations for future growth that make investors buy or sell.

So what will it be—Up? or Down?—for the market this earnings season?

And what strategy do I recommend? Read more

Update Cummins (CMI)

So much for any worries about that quarter.

Today, February 2, before the market opened in New York, Cummins (CMI) announced fourth quarter earnings of $2.56 a share (excluding non-recurring items). Cummins is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/

That was a 55.4% increase from earnings of $1.84 in the fourth quarter of 2010. The earnings results beat Wall Street estimates by 29 cents a share. (Much of this beat—18 cents—came from a favorable change in the company’s tax rate. But n 11 cents a share surprise isn’t shabby.)

Revenue climbed 19% from the fourth quarter of 2010 to $4.92 billion (versus the Wall Street projection of $4.73 billion.)

For 2012 the company guided analysts to expect revenue growth of 10% or better ($19.85 billion versus the consensus of $19.69 billion) and an EBIT margin (earnings before interest and taxes) of 14.5% to 15%. That works out to 2012 earnings of $9.80 to $10.20 a share versus the Wall Street consensus of $9.81.

Not that every one of Cummins’ business units killed during the quarter. Read more

Update Cummins (CMI)

All those warnings about weakness in the fourth quarter are starting to sound like a pattern. At least I starting to see investors and analysts leap to work building a pattern.

Be careful, though, the warnings are coming from very different directions, which should make it hard to draw larger conclusions about market sectors and the global economy.

Let’s take the October 25 poster child for fourth quarter warnings, Cummins (CMI). (Cummins is a member of my Jubak’s Picks portfolio http://jubakpicks.com/the-jubak-picks/)

That day Cummins announced third quarter earnings of $2.35 a share, beating the Wall Street consensus by 11 cents a share. Read more

Update Cummins (CMI)

It’s not just what Cummins (CMI) told Wall Street analysts on September 13; it’s also that the company said it at all.

I mean Cummins knows there’s a global slowdown going on and yet the company’s CEO and COO got up and said that Cummins would hit $30 billion in annual sales in 2015, up from $18 billion today and a 14% compound annual growth rate. And that EBIT (earnings before interest and taxes) margins would expand to 18% from 14.5% today. And, the capper, that earnings per share would hit $20 in 2015.

That makes today’s share price of $97.56 equal to a 2015 price to earnings ratio of 4.87. You’ve got to wonder why the stock climbed only 6.9% on the news that day. (Cummins is a member of my Jubak’ Picks portfolio http://jubakam.com/portfolios/ )

If you suspect that they’re putting something strange in the water out there in Columbus, Indiana, you’ll be reassured to know that Cummins can actually make a logical case for this optimism. Read more