Cummins Is Alluring... But Is It A Trap?
Stephen Simpson, CFA
Stephen Simpson, CFA
Yesterday, 12:09 PM| Yesterday, 12:09 PM
Yesterday, 11:56 AM
Tue, Nov. 15, 5:48 PM
- Cummins (NYSE:CMI) responded with a 2.2% bounce in today's trade following yesterday's news that it allegedly conspired with Fiat Chrysler to hide problems with engines on certain generations of Dodge Ram pickups.
- Barclays analyst Robert Wertheimer does not foresee a significant new liability for CMI, saying that while the lawsuit attempts to draw a connection to the emissions cheating scandal that may wind up costing Volkswagen nearly $20B, there's no clear evidence that CMI was attempting to be deceptive with its engines.
- CMI shares have powered 56% higher YTD, even though margins are shrinking and analysts are not forecasting a rebound in revenue until 2018, and even then its total sales will be much closer to what the company generated in 2013 than last year.
- "Even if you believe that all of Cummins's challenges will work themselves out, there are a lot of potential speed bumps looming for a company priced for no speed bumps," Bloomberg's Brooke Sutherland writes.
Tue, Nov. 15, 3:09 AM
- Rejecting diesel cheating claims, Fiat Chrysler (NYSE:FCAU) and Cummins (NYSE:CMI) said they will fight a class-action lawsuit filed against them on Monday.
- Lawyers representing owners of older 2500 and 3500 Dodge Ram trucks assert the companies "conspired to knowingly deceive consumers and regulators of illegally high levels of diesel emissions in their vehicles."
Mon, Nov. 14, 1:56 PM| Mon, Nov. 14, 1:56 PM | 2 Comments
Tue, Nov. 1, 8:26 AM
- Net income of $339M, or $2.02 per diluted share vs. $380M, or $2.14 per diluted share in the same quarter a year ago.
- Revenue by segment: Engine -12%; Distribution -3%; Components -8%; Power Systems -13%.
- "Due to the slow pace of growth in the global economy, we continue to face weak demand in a number of our most important markets," said CEO Tom Linebarger.
- Based on the current forecast, the company expects full year 2016 revenues to be down 9%, consistent with prior guidance of down between 8-10%. Full year EBIT is expected to be 11.3% of sales, down from the prior forecast of 11.6%-12.2%.
- CMI -3.1% premarket
- Q3 results
Tue, Nov. 1, 7:32 AM
Mon, Oct. 31, 5:30 PM
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Sat, Oct. 29, 10:42 AM
- The trucking industry is anxiously waiting for the release of key heavy-duty truck order releases next week as it assesses demand for 2017.
- Overcapacity has impacted trucking pricing this year and forced several companies to idle parts of their fleets and rethink strategy. More than half of trucking stocks with a market cap of over $50M are showing a negative YTD return.
- There's a sense that the extended downturn in freight demand could be bottoming out, a theory that could be confirmed by the upcoming reports from ACT Research and FTR.
- Looking further down the road, it can't be ignored that autonomous vehicle technology could have an impact with trucking services, logistics firms and truck makers. The dramatic delivery of 50K Budweisers (NYSE:BUD) by self-driving transport company Otto (Private:UBER) is considered by some analysts as much more than a publicity stunt.
- Ford (NYSE:F) announced last summer that it's developing smaller self-driving delivery trucks and Google has a USPTO-approved patent on a self-driving delivery truck. On the long-haul side, Daimler's (OTCPK:DDAIF) Freightliner is still testing autonomous 18-wheelers.
- Related article: MIT Technology Review on Uber Freight
- Related stocks: ULH, USAK, SAIA, PATI, PTSI, JBHT, KNX, SWFT, LSTR, MRTN, HTLD, WERN, ECHO, ODFL, CVTI, CGI, ARCB, YRCW, NAV, CMI, PCAR, FDX, UPS.
Tue, Oct. 11, 2:30 PM
Tue, Oct. 11, 10:28 AM
- There's a donnybrook breaking out between Fiat Chrysler Automobiles (FCAU +0.3%) and Cummins (CMI +1.8%) over recall costs for 130K Ram trucks with emissions problems.
- Fiat filed a lawsuit to recover $60M in costs for repairs it made on the Cummins engines. Cummins countered with a suit of its own.
- The dispute is giving an inside look at some of the some of the costs automakers take on with large recalls.
- Cummins is higher today after Goldman Sachs weighed in.
- Previously: Caterpillar and Cummins log gains after being touched by Goldman (Oct. 11)
Tue, Oct. 11, 10:03 AM
- Both have been hot stocks this year - CAT's up 30% and CMI 47% - but Goldman analyst Jerry Revich thinks there's another leg to come, and upgrades both to Buy, with Cummins added to the Conviction Buy list.
- CAT's price target is raised to $112 from $76, and suggests more than 25% upside from the current level. Cummins is hiked to $162 from $134, also suggesting more than 25% upside.
- In today's action, CAT is higher by 0.9% and CMI by 1.7%.
Wed, Oct. 5, 9:40 AM
- The engines exceed EPA 2017 greenhouse gas and fuel-efficiency standards and the highest quality standards across a 400 to 605 horsepower ratings range.
- Cummins' (CMI +1%) X15 also introduces an innovative approach to duty-cycle optimization, with two configurations, available as the Performance and Efficiency Series.
Fri, Sep. 30, 2:52 PM
- Cummins (CMI +3.2%) is initiated with a Buy rating and $150 price target at CLSA, which believes CMI shares are not expensive relative to trough expectations in 2017.
- CLSA believes the controversy surrounding CMI's market share decline in its core North American truck market is overblown in the near to medium term and is masking an improving North American on-highway market in late 2017 and improving global industrial end markets in Asia and even Latin America.
- The firm also notes CMI's pristine balance sheet for appreciation, as it yields fine returns to shareholders via dividends and share buybacks.
Thu, Sep. 22, 2:16 PM
- Fitch Ratings affirms its long-term default issue rating on Cummins (CMI +0.7%) and unsecured debt at a level of A. The ratings outlook from Fitch is kept at Stable. The update from Fitch on Cummins factors in the recent alliance between Navistar and Volkswagen.
- Fitch on CMI: "The company's solid balance sheet, low leverage and consistently positive free cash flow (NYSE:FCF) that enable CMI to cope with cyclicality in its heavy- and medium-duty truck, off-road equipment, and power generation markets."
- Full Fitch Rating report on Cummins
Wed, Sep. 7, 1:56 PM
- Cummins (CMI +2.4%) is higher even as Deutsche Bank initiates coverage with a Sell rating and a $111 price target, saying CMI's market share for NAFTA heavy-duty truck engines has contracted from the peak level by 16 percentage points to 29% with potential for further pressure over time.
- The firm notes that Paccar is moving toward its internal engine penetration target of 85%, and that Daimler is entering the North American market for medium-duty truck engines, and its DD8 platform is the “most viable competition" with CMI's ISB engine.
- Deutsche Bank says the two moves combined translate to a $0.90 mid-cycle EPS downside for CMI, not yet reflected in consensus estimates, with downside to the company’s shares due to an expected downward revision of EPS forecasts.