Editor's Note: 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.
NEW YORK (
) has been reiterated by TheStreet Ratings as a buy with a ratings score of B+ . The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.
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Highlights from the ratings report include:
- CMI's debt-to-equity ratio is very low at 0.12 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 1.14, which illustrates the ability to avoid short-term cash problems.
- CMI, with its decline in revenue, underperformed when compared the industry average of 0.5%. Since the same quarter one year prior, revenues fell by 11.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. 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.
- In its most recent trading session, CMI has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- CUMMINS INC's earnings per share declined by 20.9% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings 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 11.6% in earnings ($8.45 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. Cummins has a market cap of $20.12 billion and is part of the industrial goods sector and industrial industry. The company has a P/E ratio of 11.1, below the S&P 500 P/E ratio of 17.7. Shares are up 20.3% year to date as of the close of trading on Thursday.
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--Written by a member of TheStreet Ratings Staff.
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