Cummins Downgraded to Neutral - Analyst Blog

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We have downgraded our recommendation on Cummins Inc. ( CMI ) to Neutral from Outperform. Headquartered in Columbus, Indiana, Cummins is a leading worldwide designer, manufacturer and distributor of diesel and natural gas engines, electric power generation systems, and engine-related components, fuel systems, controls and air handling systems.

Cummins primarily sells its products to original equipment manufacturers (OEMs), distributors and other customers worldwide. The company boosts an impressive clientele including leading manufacturers like Chrysler LLC, Daimler AG ( DDAIF ), Volvo AB ( VOLVY ), PACCAR Inc. ( PCAR ), Navistar International Corporation ( NAV ), CNH Global N.V.  ">  ( CNH ), Komatsu, Scania AB ( SVKBF ), Ford Motor Co. ( F ) and Volkswagen.

The company released its third quarter earnings on October 25, 2011. Adjusted income increased to $2.20 per share from $1.33 in the year-ago quarter. Revenues rose 36% to $4.63 billion, driven by strong growth in the company's key markets, including mining, oil & gas, and North American and Brazilian on-highway as well as favorable construction demand in Asia.

The macroeconomic environment in the U.S. is taking its toll on Cummins. The company's heavy- and medium-duty trucks (which constitute 53% of the company's portfolio; mostly U.S.-based) have been hit badly of late, as have the construction segment.

In addition, it is also expected that the governments' plans to reduce inflation in India and China as well as strengthening U.S. dollar would weaken the near-term demand for Cummins products. As a result, Cummins reduced its revenue guidance to $17.5 billion-$18 billion for full-year 2011.

Considering all these, the shares of Cummins are also maintaining a Zacks #3 Rank which translates into a Hold rating over the short term.


 
CUMMINS INC ( CMI ): Free Stock Analysis Report
 
CNH GLOBAL NV ( CNH ): Free Stock Analysis Report
 
DAIMLER AG ( DDAIF ): Free Stock Analysis Report
 
FORD MOTOR CO ( F ): Free Stock Analysis Report
 
NAVISTAR INTL ( NAV ): Free Stock Analysis Report
 
PACCAR INC (PCAR): Free Stock Analysis Report
 
VOLVO AB ADR B (VOLVY): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CMI , CNH , DDAIF , F , NAV

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