Cummins Inc. (CMI) has a Zacks #1 Rank and trades at 15.1x 2011 consensus EPS estimates.

Cummins would be solid addition to any portfolio seeking growth and income. Analysts estimate that CMI will be able to achieve long-term EPS growth of 12% annually, and its stock has a current dividend yield of 1.2%.

Company Description

Cummins Inc. is one of the leading worldwide designers and manufacturers of diesel engines. The company also produces natural gas engines and engine components and subsystems. Cummins provides power and components for a wide variety of equipment in its key businesses: engine, power generation, and filtration.

Fourth-Quarter Results

Sales increased 3.0% to $3.4 billion. Cummins reported earnings per share of $1.37, easily topping the Zacks Consensus Estimate of $0.74. That marked the fourth time in the last five quarters Cummins has beaten the Zacks Consensus Estimate. Its average beat has been 48%.

Fourth-quarter results were driven by continued strength in China, India, and Brazil as well as new emissions standards in North America.

Company Guidance

For 2010, Cummins projects sales of $11 billion with a 7% operating margin. The company anticipates a capital spending of $400 million in 2010, an increase of nearly 30% from 2009, to fund projects critical to the company’s long-term growth.

In mid-March, Cummins announced that it expects to reach annual sales of $20 billion and operating income of $2.5 billion in 2014.

Cummins’ optimism is based on tighter fuel economy and emission standards as well as rising energy prices will increase demand for the company’s fuel-efficient diesel engines.

Analyst Increasing Estimates

The company’s bullish outlook has pushed analysts covering the stock to increase their earnings estimates.

In the last two months, the Zacks Consensus Estimate for 2010 is up 25%, or 49 cents, to $2.48. The consensus estimates for 2011 climbed 66 cents, or 20%, to $4.05. That represents year-over-year earnings growth of 63%.

Industry Leader

Cummins stacks up very well against its peers. Its trailing-twelve month return on equity (ROE) was 13.3%, compared to the industry average of -31.3%. Its ROE is driven by a net profit margin of 4.0%, versus the industry’s -13.5 average. Last, Cummins’ lean balance sheet has a debt-to-equity ratio of just 0.2%, which compares favorably to the industry average of 13.7%. Zacks Investment Research