Cummins Inc (CMI) has compiled an outstanding financial record of having grown profits and dividends at a 10-20% rate over the last ten years, earning a 20%+ return on equity. Like most heavy industrial firms, CMI experienced a profit decline in 2009. However, it has since recovered, and should continue to grow as a result of:
1. Its advantage over many competitors who cannot meet new emissions standards,
2. Introduction of new products,
3. Recent capacity expansion,
4. An aggressive stock buyback program.
1. Economic weakness has a major impact on sales,
2. The recent loss of Navistar as a customer.
3. An economic slowdown in two large international customers [India, China].
CMI is rated "A" by Value Line, has a 12% debt to equity ratio, and its stock yields 1.3%
|Stock Yield||Dividend Growth Rate||Payout Ratio||# Increases Since 2002|
|Debt/Equity||ROE||EPS Down Since 2002||Net Margin||Value Line Rating|
*IND is the average of the Heavy Truck and Equipment Makers Industry as compiled by Value Line
Note: CMI stock made good progress off its March 2009 low, surpassing the downtrend off its July 2008 high (red line) and the November 2008 trading high (green line). Long term, the stock is in an uptrend (straight blue lines). It is recently broke its intermediate term uptrend. The wiggly blue lines are Bollinger Bands. The Aggressive Growth Portfolio does not own CMI. However, it was just Added to the Aggressive Growth Buy List. The upper boundary of its Buy Value Range is $94; the lower boundary of its Sell Half Range is $185.