By Zacks Equity Research

Cummins Inc. (CMI) announced that it will launch diesel engines in compliance with 2014 fuel efficiency and greenhouse gases (CHG) regulations beginning in January 2013. The engines will deliver up to 2% fuel economy improvement over those produced nowadays and will be available for North American trucks. They include ISB6.7 to ISX15 lineups.

In August 2011, Cummins intended to begin actions to comply with the new fuel efficiency and GHG standards of 2014. The standard was proposed by the U.S. Environmental Protection Agency and the U.S. Department of Transportation.

Cummins also plans to focus on strengthening its position in the natural gas engine market. Accordingly, the company is investing in the development of natural gas engines.

The company plans to introduce spark-ignited natural gas engines through Cummins Westport, which is a joint venture between Cummins and Westport Innovations (WPRT). The joint venture will begin producing the engine, ISX12G, in 2013.

Further, Cummins intends to develop a new 15-liter engine, ISX15G that is based on the existing ISX15 platform. It will be capable of using compressed natural gas, liquified natural gas or bio-methane fuel. The company will begin producing the engines in early 2015.

Cummins posted earnings of $2.86 per share in the fourth quarter of 2011 compared with $1.84 per share in the same quarter of 2010. Excluding special items, the company recorded adjusted earnings of $2.56 per share, surpassing the Zacks Consensus Estimate of $2.24 per share.

Sales in the quarter grew 19% to $4.9 billion, driven by higher demand in trucks, construction, power generation and oil and gas markets in North America as well as strong growth in global mining markets.

In the Engine segment, sales increased 23% to $3.1 billion in the quarter. The increase in sales was driven by higher demand for on-highway heavy-duty, mid-range and light duty engines in North America and strong demand for oil and gas engines in North America, apart from mining engines globally.

Based in Columbus, Indiana, Cummins is a leading worldwide designer, manufacturer and distributor of diesel and natural gas engines, electric power generation systems, and engine-related components, fuel systems, controls and air handling systems. The company has four operating segments: engine, power generation, components and distribution.

Cummins is comfortably positioned to benefit from several trends, such as the new emission standards, fuel economy improvement and favorable trends for its power generation business. New emission regulations, in particular, create opportunities for the company, such as the ability to raise prices, market share gains and increased engine content.

Currently, the stock retains a Zacks #2 Rank (short-term "buy" rating). It competes with the companies like Caterpillar Inc. (CAT) and Navistar International Corporation (NAV).

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