Is July a good month for buying Cummins shares?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Jul 9, 2021
  • Cummins shares have weakened from their recent highs above $260
  • Cummins raised its outlook for the fiscal 2021 year
  • Bank of America has a Buy rating on Cummins

Cummins Inc. (NYSE: CMI) shares have weakened from their recent highs above $260 registered in June 2021, and the current price stands around $243. Cummins raised its outlook for the fiscal 2021 year, and Bank of America sees this company attractive at current price levels.

Fundamental analysis: Cummins raised its outlook for the fiscal 2021 year

Cummins is an American multinational corporation that manufactures and distributes engines, filtration, and power generation products. The company sells its products in more than 190 countries, and it is essential to mention that it also services engines and related equipment.

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The company’s business has proven improvements throughout the first quarter of 2021, and the company reported better than expected results in May. Total revenue has increased by 21.6% Y/Y to $6.09 billion, while the GAAP EPS was $4.07 for the first fiscal quarter (beats by $0.60).

Total revenue has increased above expectations (+ $740 million), and the company raised its outlook for the fiscal 2021 year. The full-year 2021 revenue should grow between 20 to 24 percent, while the EBITDA is expected to grow around 16 percent.

Through the first quarter, volume trends steadily improved each month, driven by the recovery in markets from the pandemic, and Bank of America sees this company attractive at current price levels.

“The easy money has perhaps been made in Cummins, but we see continued outperformance ahead and upgrade the stock to Buy along with our already positive view on farm machinery and equipment rental,” said Ross Gilardi, an analyst from Bank of America.

Cummins should benefit from economic growth, and the company should start generating profits with its electric engines. Cummins shares are not a strong buy currently, but this is a company that investors should have on their watch list.

Cummins trades at less than thirteen times TTM EBITDA, and with a market capitalization of $34.93 billion, shares of this company are fairly valued. The current dividend yield is around 2.27% which is not especially attractive for dividend-oriented investors, but Cummins is a very solid company with a healthy outlook.

Technical analysis: Cummins shares continue to trade in a bull market

Cummins shares are trading above support $230, and according to technical analysis, there is no risk of the positive trend reversal for now.

Data source: tradingview.com

On this chart, I marked important resistance and support levels. The important support levels are $230 and $220, $250 and $260 represent the resistance levels. If the price jumps above $250, it would be a signal to trade Cummins shares, and we have the open way to $255.

Rising above $260 supports the continuation of the bullish trend, and the next price target could be located around $270. On the other side, if the price falls below $230, it would be a strong “sell” signal, and we have the open way to $220.

Summary

Cummins shares have weakened from their recent highs above $260, but there is no risk of a positive trend reversal for now. Cummins raised its outlook for the fiscal 2021 year, and Bank of America sees this company attractive at current price levels.

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