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6 Stocks to Benefit From Truckers' Switch to Natural Gas

BOSTON (TheStreet) -- With $4-a-gallon gas and diesel at the pumps now and their prices sure to rise, natural gas is looking like a sure bet to replace diesel as the fuel of choice for the nation's high-mileage truck fleet.

Given the boom in North America's production of natural gas, there is a glut of it and it is selling at low prices not seen in a decade. Once converted to compressed natural gas (CNG) or liquefied natural gas (LNG) for use in compatible engines, it costs about 42% less than diesel on a per-gallon basis. The Department of Energy's Energy Information Administration forecasts that this difference is likely to be long-lasting.

But so far, natural-gas-powered long-haul trucks haven't been a practical alternative to diesel, since there are few natural gas refueling stations nationwide.

Its use has been limited to specific types of fleets, such as taxis or light delivery trucks, operating within a specific range of a fuel station.

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But that's changing as the trucking industry is the early phases of major change.

For one thing, engine makers, such as Cummins (CMI - Get Report), already the leading natural-gas heavy-engine maker, and truck makers, such as PACCAR (PCAR), are seeing such big demand from truck-fleet managers that they are shifting production capacity to build more engines and trucks that burn CNG or LNG.

"We expect this sector to be a growth driver for both companies, though (it's) starting off a pretty small base at present," said Jim Corridore, an S&P Capital IQ equity analyst, in a research note. "These trucks and their engines are priced at a significant premium to diesel engines, but they can provide savings since there is such a big divergence between the cost of natural gas and the cost of diesel fuel."

Others are seen to benefit as well. Clean Energy Fuels (CLNE - Get Report), originally backed by financier and natural gas advocate T. Boone Pickens, said in February that it has partnered with truck maker Navistar International (NAV - Get Report) to offer customers a comprehensive engine/truck/fuel package. Customers can lease natural gas fueled trucks from Navistar (powered by a Cummins engine), as well as contract for fuel bought from Clean Energy's 257 fueling stations.

Clean Energy also plans to build a network of 150 LNG truck-fueling stations along major truck routes that will allow LNG-powered trucks to travel coast-to-coast.

And Canada's Westport Innovations (TSX:WPT), a developer of natural-gas fuel-injection technology, is in a joint-venture deal with Cummins to design an engine, based on a Cummins diesel engine, that will burn CNG, LNG or bio-methane. It is expected to come to market early in 2013.

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Here are six stocks that should benefit from the trucking industry's shift from diesel fuel to natural-gas in the coming years:

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