Cummins ( NYSE: CMI ) record annual report on Monday was balanced by concerns about persistent margin pressure, according to analysts.
In particular, the EBITDA margin guide between 14.5% and 15.2% for the full-year was viewed as a disappointment. Meritor, while adding sales, is expected to weigh on the metric.
Jefferies analyst Stephen Volkmann advised clients that the guidance implies a below-consensus bottom line for the full year and takes away from optimism on revenue resilience.
“Cummins margins came in weaker than expected during the quarter as the company reported stronger sales but lower-than-expected gross margins with SG&A leverage roughly in-line,” he wrote. “Weaker results in China also drove JV income down about 19% year over year, though the market is set to see a recovery with CMI forecasting China truck sales the be up 15-25% in 2023.”
The same disappointment on margins was voiced by analysts at Evercore and Citi. Still, Evercore analyst David Raso told clients that he will “err on the side of the positives” after the results, eyeing the upside of China reacceleration in 2023.
Shares of Cummins ( CMI ) slipped 1.93% on Monday.
Read more on the details of the earnings result .
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Cummins shares slip as analysts raise concerns on margins