When I last wrote on Cummins (CMI) I said that I saw decent long-term appreciation potential, but that I was concerned that the truck cycle and industrials in general had overshot some. In the intervening months the industrial space had another “here, hold my beer” run and these shares are up another 20% or so – in line with industrials in general, and better than PACCAR (PCAR), but well short of agriculture and construction-leveraged names like Caterpillar (CAT), CNH (CNHI), and Deere (DE).
A potentially peaking North American truck market is definitely a concern, but I believe recent outsourcing wins give investors some positive drivers to look forward to in a few years. I likewise believe Cummins’s strong leverage to green hydrogen is a powerful sentiment offset to any cyclical risk, though what momentum investors giveth, they will eventually taketh away.
As is, I still like Cummins about as much as I like other high-quality industrials like Dover (DOV), Parker-Hannifin (PH), or Rockwell (ROK), though I am sympathetic to the argument that Cummins’s greater cyclicality should come with some “bonus” in terms of expected return.
Read more here:
Cummins: New Engine Opportunities And Clean Energy Can Patch Over Cyclical Risk
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