Cummins Recalls 25,013 Engines

Zacks

Cummins Inc. (CMI) and its joint venture Cummins Westport Inc. announced a recall of 25,013 engines. The recalled engines are Cummins Westport Model ISL G engines produced between Sep 2007 and Feb 2014 and Cummins Westport Model ISX12 G engines manufactured in the Feb 2013–Feb 2014 period.

These engines feature in a range of commercial vehicles, including school and transit buses as well as fire trucks. Blue Bird Corp. is one of the school bus manufacturers that use these engines.
 
The recall will address a fault in the engine’s sensor, which can stop working in cold weather conditions, leading to fire. According to the National Highway Traffic Safety Administration, the condensation in the tubes which distribute air into the engine may freeze during cold weather. The frozen particles in the tube will impede the proper functioning of the pressure sensor, thus raising exhaust temperatures, eventually causing a fire.

There have been no reports of injuries due to this problem. However, there have been reports of two fire incidents in vehicle exhaust pipes triggered by the problem.

Cummins posted earnings per share of $1.94 (excluding special items) in the fourth quarter of 2013, compared with $1.93 reported in the year-ago quarter. However, earnings lagged the Zacks Consensus Estimate of $1.98 per share.

Revenues in the quarter rose 6.9% year over year to $4.6 billion, mainly driven by higher revenues in North America, China and Brazil, partially offset by poor sales in Mexico, India and Australia. Revenues surpassed the Zacks Consensus Estimate of $4.3 billion.

Cummins Inc. is a leading worldwide designer, manufacturer and distributor of diesel and natural gas engines, electric power generation systems, and engine-related components, fuel systems and air handling systems. Currently, Cummins retains a Zacks Rank #3 (Hold).

Other better-performing stocks in the broader industry include STRATTEC Security Corp. (STRT), Allison Transmission Holdings, Inc. (ALSN) and Gentex Corp. (GNTX). While STRATTEC Security and Allison Transmission sport a Zacks Rank #1 (Strong Buy), Gentex is a Zacks Rank #2 (Buy) stock.

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