Al Root
Cummins stock jumped Tuesday after the diesel engine maker posted solid fourth-quarter results and an equally solid outlook for 2025 -- all amid a declining market for heavy-duty trucks.
It turns out, there is more to Cummins than trucks.
Tuesday morning, Cummins reported per-share earnings, adjusted for several charges, of more than $12 for the fourth quarter. Wall Street was looking for closer to $5, but comparability is tough. Operating profit was about $920 million, a little better than analysts projected.
Some of the charges were to reorganize Cummins' Accelera business unit, which focuses on zero-emissions technologies, including batteries and fuel cells.
"Cummins delivered strong operational results in the fourth quarter and achieved record full-year revenues, net income...and EPS [earnings per share], despite a decline in heavy-duty truck demand in North America," said CEO Jennifer Rumsey in a news release.
Shares spiked 5.6% to $367.73 in early trading, while the S&P 500 was up 0.1% and the Dow Jones Industrial Average was down 0.2%.
The outlook is helping too. For 2025, Cummins expects sales to grow 2% to 3% and earnings before interest, taxes, depreciation, and amortization, or Ebitda, to be about $5.8 billion. That's about $100 million to $200 million more than current Street projections.
Sales are predicted to rise, despite expected declines in truck-related sales. The company expects the North American heavy-duty truck market to decline about 5% in 2024. Medium-duty truck demand should fall closer to 10%.
Cummins makes a lot of engines for trucks. But it also makes power generation units. Demand from data centers is helping boost sales growth.
"Strength in data center offsetting softness in core [truck] markets," wrote Jefferies analyst Stephen Volkmann in a Tuesday report.
Power systems sales should be up 2% to 7% in 2025, according to the company, after growing 13% in 2024. Sales in Cummins' distribution business are expected to grow as well, helping offset truck weakness.
Volkmann rates shares Buy and has a $435 price target. Citi analyst Kyle Menges rates shares Buy and has a $430 price target for the stock. shares.
Mengese called the profit margin guidance "encouraging" in a Tuesday report.
Those are two bulls. Overall, just 30% of analysts covering Cummins shares rate them Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Cummins shares is about $390.
Most of Wall Street looks to be focused on the core truck market, but there is more to Cummins than trucks.
Write to Al Root at allen.root@dowjones.com
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February 04, 2025 11:23 ET (16:23 GMT)
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