Thursday, April 16, 2015

Seeking Alpha: Cummins Is Alluring... But Is It A Trap?

By and large nature teaches you to be wary of pretty things - they don't taste good, they have fangs, and so on. That may be an odd segue into a discussion of Cummins (NYSE:CMI), but it captures how I feel about the shares. I think Cummins is a great company, but as attractive as the shares seem, I do wonder how they will fare as the North American truck cycle peaks and many emerging markets continue to struggle.

I think investors forget that trucks and truck components are cyclical markets at their own risk. But I also think that the company can still generate long-term revenue and cash flow growth in the mid-single digits, and that the shares are trading below the value of those cash flows. I'm wary about buying into a peaking North American market, but the underlying strength of the components business, the opportunities in China, and the overall quality of the business make this a tough stock to ignore.

Read more here:
Cummins Is Alluring... But Is It A Trap?

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