On Dec 20, we downgraded
) to Underperform from Neutral. The downward revision was based
on the weakness in operating markets, especially India, high
competition and expectations of revenue decline.
Why the Downgrade?
On Oct 29, 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 per share. However,
earnings increased from $336 million or $1.78 per share in the
comparable year-ago quarter.
Following the release of the third quarter results, the Zacks
Consensus Estimate for Cummins' 2013 earnings decreased 6.3% to
$7.57 per share. The Zacks Consensus Estimate for 2014 dropped
5.4% to $9.32 per share. Currently, Cummins retains a Zacks Rank
We are concerned about the weakness in operating markets, which
could mar the results of the company. Cummins is witnessing a
challenging situation mainly in India. Demand from India declined
by 25% in third-quarter 2013 due to weak industrial activity and
Moreover, Cummins operates under a highly competitive
environment. New technologies, including those developed for
gasoline, will provide further competition for the company.
In addition, Cummins now expects revenues to decline 3% from the
2012 level, against the earlier guidance of in-line results. The
company also slashed its 2013 EBIT margin guidance to 12.5%-13%
Other Stocks to Consider
Tower International, Inc.
), all with a Zacks Rank #1 (Strong Buy), are performing well in
the auto and truck industry.
CUMMINS INC (CMI): Free Stock Analysis Report
GENTEX CORP (GNTX): Free Stock Analysis
LEAR CORPORATN (LEA): Free Stock Analysis
TOWER INTL INC (TOWR): Free Stock Analysis
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