Cummins Has Navistar Beat

 | Mar 08, 2012 | 12:21 PM EST
  • Comment
  • Print Print
  • Print
Stock quotes in this article:




It was the best of truck makers, it was the worst of truck makers. Excuse me for appropriating Charles Dickens' A Tale of Two Cities, but that's how I feel after reading today about the hideous quarter of Navistar (NAV) and comparing it to the blowout quarter its principal competitor Cummins (CMI) reported a month ago.

You can't talk enough about execution in this business, particularly if you are a global manufacturer, because some companies have it and others don't. Cummins has it. The company has a golden touch, taking advantage of the latest technology and building foolproof engines that are the envy of the world.

But Navistar? A lot of the huge miss this morning, a staggering $153 million loss, or $2.19 per share, was from warranties and recalls. Without one-time charges, the company reported a still-horrendous loss of $2.08 per share, when Wall Street was looking for a $0.27 loss. The company had to recall 19,000 buses and trucks because of faulty brakes made by a supplier. Of course, that loss is on Navistar, as it should be. The warranty losses of $112 million stemmed from engines manufactured between 2006 and 2008.

As pathetic as those charges were, analysts were astounded that the company cut its guidance, set just last month from $5.75 to a range of $4.75 to $5.25. Talk about not being in control of the situation.

Contrast that with Cummins, which recorded a remarkable quarter last month with sales up 19% and earnings coming in at $2.56 when the street was looking for just $2.24. Cummins is taking share and riding high on the huge increase in trucks being ordered worldwide, particularly in China.

I have been saying all year that 2012 has become the year of the stock-picker. Nothing drums home that point more than the disparity between these two companies. It's difficult for all of us to be qualitative in this market. We tend to look at earnings per share and growth rates when we compare companies. Sometimes, though, it all comes down to management. In this case, Navistar just doesn't have it together while Cummins is raking it in.

I think Cummins stock may be up too much for the moment to buy it off this disparity. The stock wrongly trades off Chinese growth, and when China lowered the growth boom Sunday, the stock shed seven points before bouncing back.

It's important to remember that in this tape, when you want to play a theme like the global growth of trucking, you must play it with the best of breed, even if it is the most expensive. Sure, Navistar's a lot cheaper than Cummins. But then again, it deserves to be.


Editor's Links

More from Jim Cramer:

Columnist Conversations

View Chart »  View in New Window »
we will add this here to cheaply protect our downside a bit BOUGHT SPY SEP 244 PUT AT 2.70 ...



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.