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Cummins' (CMI) Board Approves $2B Share Repurchase Program

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Cummins' (CMI) Board Approves $2B Share Repurchase Program

In sync with Cummins' (CMI) target to return 75% of operating cash flow to shareholders, its board approves $2-billion share repurchase program.

Cummins Inc. CMI announced that its board has approved repurchase of up to $2 billion of its common shares. Approved on Oct 9, the new share repurchase program will be applicable after completing the $1-billion repurchase program announced in 2016.

The company is focused on enhancing shareholder value by pursuing share repurchases and dividend payouts. In fact, it attained its set target of returning 50% cash inflow from operations to its shareholders in 2017.

The company has set a target to return 75% of its operating cash flow to shareholders through dividends and share repurchases in 2018. Further, the return percentage has been raised by Cummins from the previously announced return of 50% for 2018.

Cummins Inc. Price and Consensus


Cummins Inc. Price and Consensus | Cummins Inc. Quote

In sync with its cash flow returning plan, the company has entered into an accelerated share repurchase (ASR) agreement with Goldman, Sachs & Co. LLC in August 2018. The ASR is part of the company’s share repurchase plan and is approved by Cummins’ board.

Apart from share repurchase programs, the company also pays quarterly cash dividends to its shareholders. In second-quarter 2018, it hiked the dividend payout by 5.6% to $1.14 per share.

In the second quarter, Cummins’ adjusted earnings and revenues beat the respective Zacks Consensus Estimate. As of Jul 1, 2018, the company had cash and cash equivalents of around $1.32 billion. Long-term debt at the end of the second quarter was $1.57 billion, a slight decline from $1.59 billion recorded on Dec 31, 2017.

Cummins frequently embarks on partnerships and acquisitions to expand its global presence and widen its product portfolio. Further, improved demand for engines and components for heavy, and medium-duty trucks in North America is expected to drive earnings for Cummins in 2018.

Price Performance

In the past six months, Cummins’ stock has lost 6.9%, outperforming 16.1% decrease recorded by the sector it belongs to.


Zacks Rank & Key Picks

Cummins currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the auto space are Advance Auto Parts, Inc. AAP, AutoZone, Inc. AZO and Navistar International Corporation NAV. AutoZone and Navistar carry a Zacks Rank #2 (Buy), while Advance Auto Parts sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Advance Auto Parts has an expected long-term growth rate of 12.3%. Shares of the company have rallied 50.6% over the past six months.

AutoZone has an expected long-term growth rate of 12.2%. Over the past six months, shares of the company have gained 26.9%.

Navistar has an expected long-term growth rate of 5%. Shares of the company have increased 4.7% over the past six months.

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