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Cummins Inc.: The Bear Case for 2016

By Neha Chamaria – Mar 16, 2016 at 4:15PM

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Will massive headwinds cut short the recent rally in Cummins stock?

Is Cummins' diversity helping it weather the storm? Image source: Cummins analyst day
presentation, November 2015

Cummins' (CMI 0.37%) strong run up this year has fueled much interest among investors: The stock has gained 17% year to date as of this writing. Comparatively, rival Caterpillar (CAT 0.92%) is up only about 6% so far this year. Noth companies are cyclical with common end markets, and are aggressively restructuring to emerge leaner and stronger when the business cycles turn. However, subdued commodity prices are keeping Caterpillar investors cautious.

That's not to say that Cummins has left the worst behind. While the bulls have several reasons to be excited about as I highlighted in a recent article, the bears may have an upper hand given the massive challenges facing the engine maker going forward. For instance, did you know that Cummins' key engines customer, Paccar (PCAR -1.43%), is turning out to be its biggest threat right now? Or that Cummins' primary trucking market is showing signs of stress? Go through the slideshow below to get the full picture, including the answer to whether Cummins is a buy now.

Neha Chamaria has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Cummins and Paccar. 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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