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Why Cummins, Piper Jaffray, and Fastenal Jumped Today

By Dan Caplinger – Feb 4, 2016 at 5:30PM

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These stocks managed to do well even when the market didn't end up making much noise. Find out why.


Image source: Fastenal.

The stock market posted modest gains on Thursday, sending the Dow to an 80-point gain and the S&P 500 to a small percentage rise. The day was more volatile than the quiet-looking final numbers would suggest, and stocks traded in a fairly wide range as investors tried to balance the impact of falling oil prices against a sharply lower U.S. dollar to figure out the near-term direction of the market. Earnings season continued to have an impact on individual stocks, and Cummins (CMI 2.17%), Piper Jaffray (PIPR 0.95%), and Fastenal (FAST 1.43%) were winners in finishing with strong advances on the day.

Cummins climbed 8% despite posting fourth-quarter earnings that missed expectations. The engine maker reported a 6% revenue decline, and substantial impairment and restructuring charges sent GAAP net income down by about two-thirds. Conditions continued to deteriorate across most of the company's global footprint, and currency impacts were only partially to blame for the poor results. Yet even though Cummins gave guidance that pointed to further sales declines in 2016, investors appear to have taken today's market action as indicative of a turnaround in the commodities market. Such a turnaround could help Cummins sell more engines, as long as end-users that have had to rein in their capital spending start to buy more equipment that includes Cummins' products. If global markets become weak again, then Cummins' gains today could be short-lived.

Piper Jaffray soared 16% after posting its fourth-quarter results Thursday morning. Adjusted net income for the asset manager climbed by more than 40%, and the company produced record adjusted net revenues despite seeing a decline of greater than 20% in assets under management over the past year. Piper CEO Andrew Duff heralded the company's record revenues and pointed to expansion efforts as essential to the company's overall growth strategy. In particular, moves to boost hiring in Piper's financial institutions group and the acquisition of energy-focused investment bank Simmons & Company International should help the company take full advantage of opportunities as they arise, and that bodes well for Piper's long-term trajectory.

Finally, Fastenal gained 10%. The distributor of industrial and construction supplies released January sales metrics that showed net sales falling 1.6% from year-ago levels during the month. Adjusted for a smaller number of business days, however, daily sales growth came in up 3.3%. Sales gains in manufacturing were relatively similar to those in non-residential construction, and Fastenal's sales of various fastener products lagged compared to its other product lines. Because of acquisitions and organic growth, Fastenal's personnel counts have risen more than 11% in the past year. Even with its earnings having been under pressure toward the end of 2015, the potential for a turnaround in the industrial sector could lift Fastenal further in the months to come.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends 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.

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Stocks Mentioned

Fastenal Company Stock Quote
Fastenal Company
FAST
$47.59 (1.43%) $0.67
Piper Sandler Companies Stock Quote
Piper Sandler Companies
PIPR
$106.52 (0.95%) $1.00
Cummins Inc. Stock Quote
Cummins Inc.
CMI
$207.57 (2.17%) $4.40

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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