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.
Somethings 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.
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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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.
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.
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.
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.
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.
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.
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.
DIE FRAUD STREET, DIE!
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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