This week’s Stock of the Week is an old company that’s succeeding in new ways.

Profit Engine

Cummins Inc. (CMI), which designs, manufactures, distributes and services diesel engines ranging from light duty to heavy duty,  is succeeding in a diversification effort. That effort includes initiatives to get products from concept to commercialization faster and creating electrified powertrain systems and investigating other alternative fuel systems.

Revenue was $20.4 billion last year and likely will be $23.7 billion this year and $24 billion in 2019. Foreign sales now make up more than half the revenue for this prominent international company. Short of a worldwide recession, which appears unlikely anytime soon, Cummins should continue to gain market share even as it increasingly diversifies its business.

Cummins has 7,500 dealers worldwide and is known for outstanding after-sale service. It has been in business for 99 years and is well-known for listening to customers and helping them grow their own businesses. Because it sells engine parts and does service, it is not wholly dependent on sales of engines themselves. Cummins has low debt and well-above-average returns on capital and shareholder equity. It pays a dividend of $4.56/share/yr. that recently yielded 3.2% and appears secure.

Fiscal year: December. Earnings per share: 2019 est./$14.10…2018 est./$13…2017/$10.63.

Bill Staton, CFA, is senior director, Novare Capital Management, Charlotte, North Carolina, which manages $1.1 billion.

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