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Cummins Hits 52-Week High

Zacks Equity Research

On Dec 30, 2013, Cummins Inc. (CMI) reached a new 52-week high of $140.49. The surge in stock price was driven by strength in the fundamentals of the company.

Cummins posted net earnings of $362 million or $1.94 per share (excluding special items) in the third quarter of 2013, lagging the Zacks Consensus Estimate of $2.10 a share. However, the earnings were higher than $336 million or $1.78 per share reported in the year-ago quarter.

Revenues in the quarter rose nearly 4% year over year to $4.3 billion, mainly driven by strong demand in North America. Revenues were in line with the Zacks Consensus Estimate.

Cummins is positioned to benefit from its innovative products. The company steadily launches new engines to meet the global market demands and emission standards, and offers enhanced fuel efficiency.

Moreover, Cummins has the potential to benefit from higher use of its engines by a number of original equipment manufacturers (:OEM), including Nissan Motor Co. Ltd. (NSANY) and Navistar International Corporation (NAV). Cummins’ 5.0L V8 Turbo Diesel engine will be featuring in Nissan’s next-generation full-size Titan pickup truck and Scania will be using Cummins’ ISB engine in bus applications in Europe. Moreover, Cummins’ engine was featured in the constellation truck of MAN and Ford Motor Co.’s (F) vehicle in the Brazilian truck show in Fenatran.

Although in 2013 Cummins expects revenues to decline 3% from the 2012 level, it anticipates revenues in the range of $25–$31 billion by 2018. The company also projects earnings before interest and taxes (:EBIT) in the range of 16%–18% by 2018, compared with 12.5%–13% projected in 2013.

Currently Cummins carries a Zacks Rank #3 (Hold).

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