Moody's Lifts Cummins Ratings - Analyst Blog
November 21 2011 - 8:00AM
Zacks
Moody's Investors Service, the credit rating arm of
Moody’s Corp. (MCO), raised the senior unsecured
rating of Cummins Inc. (CMI) to “Baa1” from
“Baa2”. The upgrade was based on the company’s impressive product
portfolio, geographic diversity and effective financial
policies.
The rating agency also changed its outlook on Cummins to
“positive”, which could lead to another upgrade in the next 12 to
18 months.
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’s customer base comprises leading manufacturers,
including Chrysler LLC, Daimler AG (DDAIF), Volvo
AB, PACCAR Inc. (PCAR), Navistar
International Corporation (NAV), CNH Global N.V., Komatsu,
Scania AB, Ford Motor Company (F) and
Volkswagen AG (VLKAY).
Cummins is positioned to benefit from several trends, such as
new emission standards, fuel economy improvement and favorable
trends for its Power Generation business. New emission regulations
provide lucrative opportunities for the company. However, we are
concerned about the strengthening U.S. dollar and the macroeconomic
environment around the world.
In the third quarter of 2011, the Zacks #3 Rank (Hold) company
posted a 61% increase in profit to $423 million (excluding discrete
income tax items) in the third quarter of 2011 from $262 million in
the year-ago quarter (excluding pre-tax benefit related to a legal
ruling in Brazil).
However, on per share basis, the company missed the Zacks
Consensus Estimate of $2.25 despite a 65% increase in profit to
$2.20 in the reported quarter from $1.33 in the third quarter of
2010.
Revenues in the quarter rose 36% to $4.63 billion, which was
slightly higher than the Zacks Consensus Estimate of $4.60 billion.
The improvement in sales and earnings were attributable to strong
growth in the company’s key markets, including mining, oil &
gas, and North American and Brazilian on-highway as well as
favorable construction demand in Asia.
Cummins expects to generate revenues of $17.5 billion–$18
billion for the full year 2011, which represents an increase of
over 30% compared with 2010. The company also expects to report
earnings before interest and taxes (EBIT) between 14% and 14.5% of
sales for 2011 compared with 12.5% in 2010.
CUMMINS INC (CMI): Free Stock Analysis Report
DAIMLER AG (DDAIF): Free Stock Analysis Report
FORD MOTOR CO (F): Free Stock Analysis Report
MOODYS CORP (MCO): Free Stock Analysis Report
NAVISTAR INTL (NAV): Free Stock Analysis Report
PACCAR INC (PCAR): Free Stock Analysis Report
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