Cummins (CMI) Stock Analysis
Cummins (CMI) has paid a dividend since 1948 and
increased its dividend for 11 consecutive years;
qualifying the company as a Dividend Contender.
Current Dividend: $4.10
Dividend Yield: 2.7%
Cash Dividend Payout Ratio: 50%
Market Capitalization: 26 B
Enterprise Value: 26 B
Industry: Diversified Industrials
Cummins Inc. (CMI) designs, manufactures, distributes, and services natural gas and diesel engines and engine-related component products.
CMI is the largest diesel engine manufacturer in the world. It also sells components directly to equipment manufacturers, including Paccar and Daimler. It has a network of 600 distributors and 7,200 dealer locations in over 190 countries. The company employs 55,000 people and produces almost $20 billion in annual revenue.
Cummins has four business segments: Engines, Components, Power Generation, and Distribution.
Engines (43% of Sales)
The Engine Business Unit manufactures a range of diesel and natural gas powered engines for the heavy and medium-duty transportation markets. Cummins also sells new parts and services and remanufactured parts and engines.
Distribution (25% of Sales)
The Distribution Business Unit provides a full array of products, parts, services and service solutions such as maintenance contracts, engineering services, and integrated products. The segment consists of 17 company-owned and 10 joint venture distributors at 233 locations in 90 distribution territories.
Components (21% of Sales)
The Components Business Unit supplies filtration products, turbochargers, aftertreatment systems, intake and exhaust systems, and fuel systems for commercial diesel applications. They also develop aftertreatment and exhaust systems.
Power Generation (11% of Sales)
The Power Generation Business Unit designs and manufactures components that make up power generation systems. This segment also offers power generation systems, components, and services; as well as alternative-fuel electrical generators for use in recreational vehicles, commercial vehicles, recreational marine applications and residential applications.
SWOT Analysis For Cummins (CMI)
Cummins has increased its market share (and its moat) by focusing on helping customers meet global emission standards that are becoming more rigorous.
A pristine balance sheet allows management to continue focusing on its successful growth strategy. Cummins unique approach of partnering with locals on overseas projects has many advantages.
The company competes in a cyclical industry with large swings. Its global presence (44% of Sales) subjects the company to risks not present in its North American businesses (56%. of Sales).
Cummins has a unique model of growing globally. The company insists on a 50/50 partnership with locals instead of full ownership. This has allowed CMI to get into tenacious markets and implement policies that benefit both the company and the local market.
Continued push from the EPA toward ever stricter emissions standards could cause capital expenditures greater than expected; and worse yet, expenditures that are not recoverable through price increase.
Dividend Analyzer Checklist
(updated January 2017)
Dividend Safety Score (20/33 points)
Dividend Per Share (ttm): $3.95
Dividend Payout Ratio (ttm): 57%
Dividend Per Share (10 Year Growth): 27.9%
Cash From Operations (CFO) Per Share (ttm): $13.07
CFO Dividend Coverage (CFO / DPS): 3.3 (3/6 points)
Free Cash Flow (FCF) Per Share (ttm): $8.85
FCF Dividend Coverage (FCF / DPS): 2.2 (4/6 points)
Net Financial Debt: $448 M
Total Assets: $15136 M
Net Financial Debt / Total Assets: 3% (10/12 points)
Net Financial Debt to EBITDA (ttm): 80%
Total Liabilities to Assets Ratio (Qtr.): 54%
Piotroski Score (1-9) (TTM): (3/9 points)
Profitability & Growth Score (24/33 points)
Revenue (10 Year Growth) *CAGR > 4.14%: 6.8% (4/4 points)
EPS Basic Cont. Operations (10 Year Growth) CAGR > 4.14%: 9.7% (4/4 points)
Cash From Operations (10 Year Growth) CAGR > 4.14%: 10.5% (6/6 points)
Operating Earnings Yield (ttm): 6.9% (3/7 points)
Net Income (ttm): $1177 M
Gross Profit (ttm): $4544 M
Total Assets: $15136 M
Gross Profitability Ratio = GP / Total Assets: 30% (7/12 points)
Cash Return On Invested Capital (CROIC)(tttm): 16%
Return on Invested Capital (ROIC): 13%
Return on Invested Capital (ROIC) (5 Year Median): 17%
Return on Invested Capital (ROIC) (10 Year Median): 18%
Valuation Score (21/34 points)
Free Cash Flow Yield (ttm): 6.3% (7/9 points)
EV to EBIT (ttm): 14.2 (5/9 points)
EV to EBITDA (ttm): 10.9 (5/9 points)
PE10: 22.0 (4/7 points)
Price to Sales Ratio (ttm): 1.3
Price to Book Value (ttm): 3.4
Price to Earnings Ratio (P/E) (ttm): 20.1
TOTAL POINTS – (65/100) (50 is an average score)
*Compound Annual Growth Rate (CAGR)
**A Compound Annual Growth Rate of 4.14% = a 50% gain over 10 years.
Latest Earnings Report: 11/01/16
Estimated Next Earnings Report: 2/4/17
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(updated January 2017)
Cummins (CMI) is ranked #35 (out of 257) overall and #4 (out of 57) in the Industrials Sector by the Dividend Analyzer.
Type of Investor / Recommendation
Large Diversified Dividend Portfolios / Should Be Considered
Looking For Exposure to Industrials Sector / Should Be Considered
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High Income: None
Arbor Asset Allocation Model Portfolio (AAAMP): None
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