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Cummins Is So Good, It's Tricky

May 05, 2021 7:05 AM ETCummins Inc. (CMI)9 Comments

Summary

  • Cummins reported much higher than expected earnings and sales as its business is benefiting from a steep increase in truck demand.
  • The company significantly raised its guidance and is in a great spot to further hike dividends and buybacks.
  • Unfortunately, the valuation is a bit lofty, which means that I would advise (new) investors to buy/add on weakness.

Cummins Vertriebszentrale. Cummins ist ein Hersteller von Motoren und Energieerzeugungsgeräten.
Photo by jetcityimage/iStock Editorial via Getty Images

I have covered Cummins (NYSE:CMI) a lot on this website in the past as the company is known as a reliable dividend growth stock with a massive footprint in the (diesel) engine industry. This cyclical company

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Comments (9)

D
I see CMI as a $300 stock. The forward p/e is around 16. Less expensive than the market. And a terrific company with loads of opportunities.
EliasMouawad profile picture
"I think new investors should initiate a position once Cummins drops 8-10%"
The market is so overvalued i would prefer a 15% drop.
dunkmaster profile picture
@EliasMouawad

fastgraphs is calling fair value/typical PE of 15 at just over 200 so maybe even a bit more.

It is hard to find stuff that is not priced even worse at the moment.
dunkmaster profile picture
I hate myself for not backing up the truck in Jan 2015 when CMI went under $100....ugh...I knew it was cheap and just did not have the guts to put all my cash in. Quality does not get cheap that often.
peace 2 u profile picture
In the course of a year, it has gone up $100 per share. I like those returns; I do not like my failure to buy more shares.

Oh well.

Just a thought or two.

Peace.
b
Vandooman profile picture
Good analysis as usual. I used to buy Cummins ate the bottom of a cycle and sell at the top. The ultimate cyclical. I did it again and have a large gain. The question is whether to let it ride or play the cycle again. CMI is about the only stock I have timed markets with. Love the company and may let my large position ride, based on the new technologies. I agree with Charley Munger that you should buy a great company then sit of your whatever.
Leo Nelissen profile picture
@Vandooman Thanks. Always good to read your comments! I think CMI is a better trading tool than DE and CAT. Yet, its dividend yield is still 'O.K' and I wouldn't want to bet against these companies as the Fed is basically telling us they will let inflation run hot.
M
I've been trying to get in on Cummins for 8 months 'on weakness' as you say but it has just continued to trend upwards! Feel like i've missed the boat.
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