July 9, 2012
July brings a whole slew of quarterly earnings reports from the major equipment and engine manufacturers, including Cummins, which seasoned investors with a sweet 25-percent increase in its dividend, before noting a reduced outlook for the remainder of 2012.
The headwinds facing the company have to do with the global economic slowdown, a decrease in truck and power generation orders, and an increasingly expensive dollar abroad. The company had hoped for a 10-percent increase in revenue this year, but instead had to report that, at best, it would be able to match revenue for 2011.
The news seemed to infect several other industrial stocks Tuesday, with Cat down 3.5 percent, Deere off 2.4 percent, and GE dropping 2.2 percent. Cummins stock has dropped almost a third since March, from $130 to $87. But buy and hold investors take note that $100 worth of Cummins stock from five years ago would be worth $165 today. With a P/E ratio of around 9, it certainly looks like a better investment than Facebook.
We’ll know more about the health of the global construction market on July 25 when Caterpillar releases it’s annual report.