Cummins Inc Stock Buy Recommendation Reiterated (CMI)

NEW YORK (TheStreet) -- Cummins (NYSE:CMI) has been reiterated by TheStreet Ratings as a buy with a ratings score of A. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, robust revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

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Highlights from the ratings report include:

• The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Machinery industry average. The net income increased by 32.6% when compared to the same quarter one year prior, rising from $343.00 million to $455.00 million.
• Despite its growing revenue, the company underperformed as compared with the industry average of 17.2%. Since the same quarter one year prior, revenues rose by 15.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
• CMI's debt-to-equity ratio is very low at 0.11 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.17, which illustrates the ability to avoid short-term cash problems.
• Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Machinery industry and the overall market, CUMMINS INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
• CUMMINS INC has improved earnings per share by 36.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, CUMMINS INC increased its bottom line by earning $9.56 versus $5.28 in the prior year. For the next year, the market is expecting a contraction of 3.0% in earnings ($9.27 versus $9.56).

Cummins Inc. designs, manufactures, distributes, and services diesel and natural gas engines, and engine-related component products worldwide. It operates in four segments: Engine, Components, Power Generation, and Distribution. The company has a P/E ratio of 8.7, equal to the average industrial industry P/E ratioand below the S&P 500 P/E ratio of 17.7. Cummins has a market cap of $17.05 billion and is part of the industrial goods sector and industrial industry. Shares are down 2.2% year to date as of the close of trading on Friday.

You can view the full Cummins Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

 

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