Cummins Inc. (CMI) plans to more than triple its investment in India to $500 million by 2015 from $150 million allocated so far. The company has already invested $110.2 million of the allocated amount in its Phaltan manufacturing site near Pune.
The Phaltan site manufactures diesel and gas engines of various capacities to cater to the power, industrial and automotive markets in India, U.S. and Europe. The investment helped the company upgrade its range of products to include high horsepower engines.
The increased investment help execute projects such as manufacturing of high-pressure fuel systems, 2.8-3.8 litre diesel engines for commercial vehicles and emission solutions.
Cummins operates about 10 entities in India, including Cummins India. The company had been spending about $40 million per year in the country. It is the first time that its investment cap has been lifted over $100 million.
By 2015, Cummins expects India to contribute 15% of its global revenues, an increase from the present contribution of 10%. In addition, the company anticipates exports from India to increase to 40% from 30%.
Cummins reported a profit of $251 million or $1.28 per share in the third quarter of 2010, a significant rise from the year-ago level of $95 million or 48 cents per share. However, the company’s earnings missed the Zacks Consensus Estimate of $1.40.
Sales for the company amounted to $3.40 billion in the third quarter, up 34% from $2.53 billion in the same quarter last year mainly driven by strong sales gains in its international markets.
Due to higher profits, Cummins raised its EBIT guidance for 2010. The company anticipates EBIT margin of 12.5% on revenues of $13 billion, up from the prior outlook of 12% of sales.
Based on the better outlook and strong performance in the non-U.S. markets, Cummins retains a Zacks #2 Rank on its stock, which translates to a short term (1–3 months) recommendation of ‘Buy’.
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