Fitch Ratings Services has raised its Long-term Issuer Default
Rating (IDR) and long-term debt ratings on
) to 'A' from 'A-'. Along with the rating upgrade, Fitch has
conferred a stable outlook on the entity.
CATERPILLAR INC (CAT): Free Stock Analysis
CUMMINS INC (CMI): Free Stock Analysis Report
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The rating upgrade was based on the company's strong operating
profile, consistently low leverage, financial flexibility, and
improvement in its operating margins. The rating agency also
factored in the company's cyclic end market and its ability to
generate positive free cash flow even in the downturn.
The company benefits from its leading positions in the core engine
and power generation markets, geographic diversification, global
distribution network, and technological capabilities abiding the
strict emissions and fuel economy regulations. The updated
technologies help the company to meet the changing global emissions
standards and rising demand for fuel efficiency. In addition, well
funded pension plans provide financial flexibility.
Cummins, in the second quarter of 2012, registered a 2% growth in
adjusted earnings per share to $2.45 from $2.41 in the year-ago
quarter despite a fall in the adjusted net income to $465 million
from $468 million in the corresponding quarter last year. The
results surpassed the Zacks Consensus Estimate by 18 cents. The
year-over-year rise in earnings per share was attributable to a
fall in average shares outstanding to 190.1 million in the quarter
from 194.4 million shares in the year-ago quarter.
Total revenues went down 4% year over year to $4.45 billion in the
quarter, slightly lower than the Zacks Consensus Estimate of $4.47
billion. The decline was due to weak international markets in
Brazil and China.
Cummins faces stiff competition from
Navistar International Corporation
). Currently, it retains a Zacks #5 Rank, which translates into a
short-term (1 to 3 months) Strong Sell rating.