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Cummins Still A Sell Ahead Of Earnings

Author : Date : 2013-7-4 9:03:07

Cummins Inc. (CMI) reports earnings on July 30 - and, following the disappointing report last quarter, the stock is still a sell at current levels.

Highlights:

Cummins Inc. is a global leader in the Industrial Goods/Diversified Machinery segment. CMI through its diverse network channel consisting of over 600 distribution locations, 6,500 dealer locations and approximately 44,000 employees, distributes and services engines in over 190 countries and territories worldwide.

The stock closed Tuesday's trading session at $110.20. In the past year, the stock has hit a 52-week low of $82.20 and 52-week high of $122.54. Technical indicators for the stock are neutral. CMI has a market cap around $20.6 billion.

Growth and Balance Sheet:

Cummins Inc. reported a sharper-than-expected drop in first-quarter earnings citing weak demand for its turbines and engines in most of its markets, especially the mining and oil and gas industries. First-quarter net profit fell to $282 million or $1.49 a share, from $455 million, or $2.38 a share, a year earlier. Sales dropped 12 percent to $3.9 billion.

More disappointing - sales in the United States and Canada, which accounted for half of Cummins's revenue during the quarter, fell 15 percent, primarily as a result of lower demand from makers of commercial trucks as well as continued weakness from oil and gas markets. Cummins's Engine segment experienced the most significant decline in demand during the quarter with an 18% fall in unit volumes. Shipments of high horsepower engines ebbed 24% due to weakness in mining, oil and gas and power generation markets.

Cummins expects 2013 revenues to be flat to down 5%. The company also expects EBIT margin between 13% and 14% for the year.