Can Cummins Still Grow in a Sluggish Economy?

On Tuesday, Cummins (NYSE: CMI  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Cummins has long been a go-to provider of engines and related components for a variety of industrial purposes, especially heavy-duty trucks, buses, and other heavy equipment. The company has gotten a lot of attention lately for its natural-gas-powered engine technology, which aims to help its customers take advantage of low nat-gas prices. Let's take an early look at what's been happening with Cummins over the past quarter and what we're likely to see in its quarterly report.

Stats on Cummins

Analyst EPS Estimate

$1.86

Change From Year-Ago EPS

(22%)

Revenue Estimate

$3.97 billion

Change From Year-Ago Revenue

(11.3%)

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

How will Cummins keep growing this quarter?
Analysts have gotten less optimistic about Cummins' earnings prospects in recent months, cutting a dime off their earnings-per-share call for the just-ended quarter and reducing full-year 2013 estimates by $0.25 per share. That has helped contribute to a 3% drop for the stock since late January despite a broad rise in the overall stock market.

The Motley Fool named Cummins the best company in America based on its focus on engine solutions that balance the needs of its customers against the good of society. Cummins has made a viable business model out of developing high-performance engines that nevertheless provide fuel efficiency and reliability while producing less pollution. Just last month, Cummins announced a deal with Eaton (NYSE: ETN  ) to produce a heavy-truck powertrain package to improve fuel economy by 3% to 6%.

But the big push for Cummins has been in natural-gas powered engines, where it has historically worked with Westport Innovations (NASDAQ: WPRT  ) and has also gone out on its own. That's been a huge growth area, as the Cummins Westport joint venture got a huge order in February for 900 nat-gas-fueled busses for the mass-transit entities serving Los Angeles and San Diego. Despite modest rises in natural gas prices, they still remain well below equivalent oil prices, and demand for nat-gas alternatives hasn't slackened.

In Cummins' quarterly report, watch for the company to discuss how recent moves from corporate customers are pushing it to expand more quickly. As Wal-Mart (NYSE: WMT  ) and other users seek to increase their use of nat-gas-powered trucks, Cummins Westport has a huge potential for further growth even if a cyclical downturn affects more traditional heavy-machinery and component makers.

Find out more about Cummins and its relationship with Westport Innovations as they try to take advantage of abundant, cheap, and clean natural gas. The Motley Fool has released a premium report breaking down Westport's opportunities, competitive advantages, and risks. To get started, simply click here now for instant access.

Click here to add Cummins to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


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