Cummins' pain could be your gain

If trucking is indeed troughing, this stock is the one to own as bad news offers investors a good chance to get in.

By Jim Cramer Oct 30, 2013 11:04AM

TheStreet.com logoCummins Inc. Columbus MidRange Engine Plant in Columbus, Ind. © Darron Cummings/APSomethings is not jibing. That conference call Tuesday from Cummins (CMI), the engine company -- which was about as negative as you can get -- didn't really translate into declines in a lot of other stocks that should have been affected. For example, why were shares of Wabco (WBC), the big truck-braking-and-suspension company, not down on the day? The stock was almost at its 52-week-high coming into the session, for heaven's sake. It should have been clubbed.

 

Caterpillar (CAT), despite endless negativity on its last call, really wasn't down much at all, again confounding those who had expected a second world of hurt put in for this key Dow Jones ($INDU) stock. Yes, Caterpilllar has fallen from $89 -- where the stock was when the company reported -- to $84 Tuesday. But all that decline has done is take the stock back to where it had been seven days before it had lowered the boom on itself. It hasn't gone any further than that. Shouldn't Caterpillar have had another pummeling?

 

Mining-equipment company Joy Global (JOY) did lose $0.92, dropping from $58.75 to $57.78 -- but, given the run this stock has had in the last 10 days, it should be appreciably lower after the Cummins call. It should maybe be as low as $54 to $55, if what Cummins said about its last quarter applies to the future.

 

Finally there's Eaton (ETN), so related to trucks still, even as the company has diversified into many different electrical processes and controls, especially since the closing of the Cooper deal. What happened there? It finished up on the session, not down, but up $0.76.

 

What is there to make of this strength in light of the hideous weakness from Cummins, the best-of-breed truck-and-power-engine company?

 

I think some things that went wrong at Cummins this quarter, were, indeed, Cummins-specific. I had had no idea, for example, how exposed to India this company is. India was an unmitigated disaster. The call made me want to immunize everyone's portfolios against any company dependent upon India for business. Wow. It was shocking.

 

But what wasn't all that shocking was the weakness in engines. That's because Alcoa (AA), which makes the aluminum for it, told you to expect truck weakness going in, and Caterpillar did the same. Cummins came in at a high despite Alcoa and Caterpillar's forecast -- and maybe that was the real oddity. In fact, I felt bad for Caterpillar after I read the Cummins call, because sales were pretty much consistent everywhere in this downturn.

 

Still, though, what explains the strength in the others relative to Cummins? I think that, unlike Cummins, which was circumspect about the future, Eaton told you that things had started to get better by the end of the quarter and that October's been good.

 

Cummins gave you no hope to speak of. But, due to Eaton's comments, I am more emboldened to suggest buying Cummins after all of the estimates come down Wednesday.

 

If there is anything that's truly disappointing about Cummins that's not transient, it's how little attention the company paid to its natural-gas-engine initiative. The company didn't even bring it up. An analyst asked about it, and the management's reaction was curious, to say the least.

 

Mark Smith, the investor-relations executive on the call, responded to a query about how well its new natural gas engines were selling by saying the "acceptance has been good." Then, after a brief moment, he added, "In fact, our sales are running a bit higher than our internal projections."

 

If that's the case, I would have thought that Cummins would have stressed it much more, yet it was more of an afterthought. It's totally depressing for those of us who want to see a switch from dirty imported diesel to much cleaner liquefied natural gas, especially with the new Cummins engine, which I thought was a very big deal for the industry.

 

Look, Cummins is a great American company. It is going to do amazing things when fleets start replacing old engines and countries expand environmental laws to make for cleaner, less-polluting machines.

 

Right now, though, I think Cummins has opened our eyes to the fact that this best-of-breed player is no more immune than are many others in the sector. To that I say: OK, if that's the case, the expectations are now wrenched out, and it's time to try to figure out a good entry point if, alas, it isn't here already. Cummins shares never sold off in light of all of the weakness abounding away. If Eaton is right and trucking is troughing, Cummins is the one to own. I bet it, too, is troughing, right here, right now, and you just caught still one more chance to pick some up at better prices than you might get just a few weeks from now.

 

Jim Cramer's headshot


At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long JOY and ETN.



 

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188Comments
Oct 30, 2013 12:52PM
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Last months employment numbers revised downward again for the 432 consecutive month.  But I guess only a racist Obama hater would bother to notice.  Just believe the guberment lies and everything will be okay.
Oct 30, 2013 1:44PM
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The real flaw in this ACA is the idea they will scare younger healthier workers into signing up thinking they will face a penalty for not signing up.  Like when I accept a job application and the person speaks very little English, spells their name differently than what is on their out of state drivers license, and they nearly always declare ten dependents on their w-2. They will just give up the minimal refund as the penalty and move on.  We already have a huge underground illegal economy.  This ACA will just add to its numbers.  I predict we will eventually have millions and millions of more people in this country that don't exist on any legitimate file.

Oct 30, 2013 1:34PM
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There are people I care about that do not have good insurance. They work at companies that don't offer it. They make decent money and have personal policies mostly with high deductables and high

co-pays. The only thing ObamaCare is going to do for them is

 

1. Nothing because they will buy the low end policy similar to what they had. They may even have to pay a bit more for this because of the stupid maternity requirement.

 

2. Forced to buy something they have felt like they could not afford up until this time. A better policy. In this case I don't see them getting a bargain. Maybe they won't get hosed but face it up until this time they did not feel they could afford it. There goes a chunk of their discretionary spending. How's that going to help the economy.

 

3. Pay the penalty which we all know is just code for TAX.

 

Sounds pretty crappy.

Oct 30, 2013 1:29PM
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A  LITTLE AT A TIME 

79. That “Change we can believe in” will be the republican slogan in 2012.

78. Not joining the European Union.

77. Independent thought.

76. People who pay their Mortgages on time.

75. Legal immigrants.

74. Kindergartners not having sex education.

73. People who say what they mean and do what they say.

72. A weak military in any country other than the United States or Isreal.

71. A strong Isreal.

70. Joe Biden telling the truth.

69. Entering into a Christian church.


Oct 30, 2013 12:01PM
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There are two article about the federal reserve this morning and no place to comment so I'll do it here.

 

Janet Yellen is not the person we need!!!! All she will do is subsidize the big banks, the stock market and do nothing for the American people. The idea that the fed, by printing money can, creates jobs is BS.

We need a fed chairman that will do the following.

1. Maintain an accurate and honest CPI.

2. Keep the real inflation rate between a deflationary 1% and 0% inflation (no more inflation). This will increase the purchasing power of the consumer. Also, this will bring real earnings to savors. If, savers can earn real income on savings, interest rates will stay low.  Also, it will increase the value of the dollar. This would move money to America (an estimated 5 trillion dollars).

3. Maintain an honest and accurate cost of government, based on final consumption sales tax only – no person or item exempt - $35,000 annual income. Example – When a consumer buys $100 in groceries the checkout would add $5 for local taxes, $25 for state taxes, $30 for federal taxes, plus $14 to pay off the federal debt (17 trillion 15 year payout, 5% interest) then add unfunded federal liabilities $72 (126 trillion, 30 year payout, 5% interest). Groceries plus government costs = $247. This will give the American people an understanding of the true and real cost of government.

Oct 30, 2013 11:23AM
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Off topic but a good laugh for conservatives. This liberal media we love so much could very easily turn rabid on this administration. The secret is to be quiet. Right or wrong this Merkel thing will only get worse. A powerfull woman being spied upon by a gang of men. Very very tough for the liberal media to let go of. And Obama misinforming citizens about the costs of the ACA. Time for conservatives to be quiet and let the liberal media stumble all over themselves. Like any good coach you need to use your opponents weakness to your benefit. If you like good entertainment this could be the ticket.
Oct 30, 2013 11:15AM
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this isn't a volatile sector.  cummings is on par with CAT, Ingersoll, John Deere, etc.  these are strong companies.  i doubt you buy their stock for anything other than for dividend and long term equity growth. 

 

they are world class suppliers with fingers everywhere in the world.  buying stock in these guys is a slick way of being invested in the world markets while also being invested in a USA company. 

Oct 30, 2013 2:03PM
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All kidding aside I watch the Fox business channel in the evenings and nearly every day now we see the Guberment levying fines for all sorts of misdeeds and corruption and now this Twitter offering seems totally corrupted as well.  Folks this country can not and will not improve and prosper with nearly everything based on lies and thievery.  As always it all starts at the top and are we forever doomed to failure because of our inability to avoid corruption?  Will this ever stop?
Oct 30, 2013 11:19AM
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Cramer is talking about Cummins and he doesn't even mention a single semi-truck manufacturer?  Western Star?  Peterbilt?  Freightliner?  What about all the big ships that use Cummins engines?

C'mon, man...

Oct 30, 2013 4:20PM
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Giving a damn means saying NO sometimes. No we will not extend your unemployment insurance. That would have been a good NO.... for the tax payer and for the worker........ now no one wants them because they are considered unemployable due to the length of time out of work...... Catch 22 that a BIG NO could have prevented.
Oct 30, 2013 12:25PM
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Fatty is the patient in the asylum thinking he is a Doctor and making his daily rounds offering his evaluations of each staff member.  Three funny.
Oct 30, 2013 12:23PM
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VV
Don't think it's fair to lump NTU in with others, he is respectful of others and offers his opinions without insult.  Whether you agree with him or not insulting him to me says you don't read his posts all that carefully.  
Oct 30, 2013 1:05PM
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100 THINGS THAT SCARE OBAMA

100.   Not having a Teleprompter

99.  Having to answer a real question by a real reporter

98. Meeting Joe the Plumber again.

97. Having someone tell him that he isn’t Jesus.

96. Meeting Jesus.

95. Special Olympic bowlers.

94. Someone who actually pays their taxes.

93.  Privately held companies.

92. People who get bonuses.

91. Being without his Blackberry.

90. A bank not owned by the Government.

89. People who think they can make it without government help.

88. A balanced budget.

87. A patriotic American.

86. Having to tell the truth.

85. Arm wrestling his wife.

84. Having to pick a gift for the queen of England.

83. Having a town hall meeting with people who aren’t democrats.

82. Having to tell people that the people who ask him question at town hall meeting are party stooges.

81. A grateful, free Iraqi.

80. The economy won’t turn around at his word.

Oct 30, 2013 12:45PM
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Evil.......... You don't work for that Canadian company that did such a bang up job on the ObamaCare website do you? ....... come on now.
Oct 30, 2013 2:50PM
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I'm sure somehow it is the grocery stores fault that the food stamp program has grown like a cancer too but knowing that does nothing for a working tax paying middle class citizen.

Oct 30, 2013 1:25PM
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Anyone seen any ACA cards on Craigs List yet?
Oct 31, 2013 2:14AM
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UP, DOWN, UP DOWN, UP, DOWN, UP, DOWN, UP, DOWN! THAT'S THE EXTENT OF YOUR DAILY STUPID CONVERSATIONS ABOUT FRAUD STREET. THE BIG BOYS WIN AND THE REST OF YOU LOSE. GAMBLING AT FRAUD STREET IS FOR IMBECILES! POLITICS HAS MEANING AND SHAPES A NATION, NOT FRAUD STREET.

DIE FRAUD STREET, DIE!

Oct 30, 2013 12:53PM
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LOL
No dlh I wasn't involved with that one, wouldn't show my face around here I was.  I have to say that is one of the worst executed projects I've seen in some time.  With all the hype and importance of it I can't believe it was bungled so badly.
For the record I work for and insurance restoration contractor, flooded basements, fires, break ins, vehicle impacts, wind/hail and that stuff.  Estimator/project manager is the job title.
Oct 30, 2013 11:34AM
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Something else Cramer forgot - Cummins makes generators and just about every oil rig in the Gulf and on the North Slope in Alaska uses them.  So do a bunch of boats - from yachts and crab boats to huge trawlers and cargo ships.
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