Investopedia: Cummins Cannot Outrun Expectations

It is both to Cummins' (NYSE:CMI) credit and misfortune that the company has trained analysts and investors to expect a lot. This manufacturer of heavy-duty engines and power generation systems had handily surpassed earnings estimates in three of the last four quarters, analysts had been steadily raising estimates and target prices, and institutional investors had pushed the stock up more than 100% in the past year. 

So when the company delivered a quarter that many industrial CEOs could only dream about, Wall Street's reaction was little more than "what else ya got?" delivered with a shrug.

A Cap to a Strong Year
For the fourth quarter, Cummins reported that revenue rose 22% to over $4 billion. Engine revenue is still more than 50% of the total, and this segment grew 15% despite ongoing weakness in the U.S. market. As it has in recent periods, Cummins more than made up for an iffy North American on-the-road market with strong performances overseas and in industrial segments like mining and agriculture - no surprise, really, given the strong results from the likes of Caterpillar (NYSE:CAT), Deere (NYSE:DE), Komatsu (Nasdaq:KMTUY) or Joy Global (Nasdaq:JOYG).

Elsewhere, power gen revenue jumped 50% (to over $900 million), while component revenue rose 25%.
As Cummins continues to pull out of the recession, strong revenue is translating into incremental operating leverage. Operating income rose 41% this quarter and the operating margin expanded by almost two full points. Although margins in the components business did slip, better performance in engines and significantly better results in power gen more than made up for it. (For more, see Zooming In On Net Operating Income.)

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