Those who believe in Cummins
Cummins looks all revved up to maintain the momentum. I'll tell you how.
Cummins' sales depend a lot on the health of the trucking industry, as its engines are widely used in heavy- and medium-duty trucks. Fortunately, the North American truck market is well on its way to a solid rebound with high freight rates and tonnage. Additionally, the need to replace an aging fleet is working well for industry components. Record revenue and rising truck deliveries reported by trucking giant Paccar
Cummins is in a good position to take advantage of the recovery, as it derives more than half of its engine segment sales from the North American market. In the fourth quarter, sales in this segment rose 23% with the rise in demand for trucks. And for the full year, revenue from North America surged a staggering 53% to hit a record high.
Into the emerging markets
Cummins also has the emerging-market advantage. It generated record revenue from India, China, and Brazil last year, with overall overseas revenue climbing 27%. These fast-growing markets could become the key to Cummins' future growth.
Cummins is expanding capacities and setting up new facilities in these markets, as well as launching new products that meet the respective country's emission targets. It has strong tie-ins with some of the best-known names in the industry -- the 50:50 joint venture with leading Indian automaker Tata Motors
Some months back, Cummins also joined hands with China-based construction equipment maker LiuGong. With production expected to begin next year, the partnership will help Cummins increase its presence in one of the largest truck markets in the world.
The Westport edge
For me, of all the tie-ins Cummins has, the one with Westport Innovations
The Foolish bottom line
Cummins' engines are also used in nonresidential construction, oil and gas, and mining markets, which are currently doing well (Manitowoc's and Caterpillar's latest numbers are proof). Any further uptick in these should support the recovering U.S. truck market, keeping Cummins busy. So there are many reasons to believe Cummins will keep delivering the goods.
I am not the only one who thinks so, as Cummins has bagged a coveted five-star ranking from our Motley Fool CAPS community. Keep tracking the company by adding it to your stock watchlist, our free and personalized stock-tracking service.
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Neha Chamaria does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Westport Innovations, Paccar, and Cummins. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.