Cummins Shares Not Expensive Relative To Expectations

End-Market Recovery On Way

CLSA's Kristine Kubacki believes the controversy surrounding the company's market share decline in its core North American truck market is overblown in the near to medium term.

The analyst expects the downward trend to stall over the next nine to 10 quarters. The decline, according to the analyst, is masking an improving North American on-highway market in late 2017 and improving global industrial end markets in Asia and even Latin America.

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Balance Sheet Strong

The firm also singled out the company's pristine balance sheet for appreciation, as it yields notable returns to shareholders by way of dividends and share repurchase.

Not Too Pricey Relative To Prospects

The firm noted that its $150 price target is based on 19 times its trough 2017 earnings per share estimate of $7.90. Expecting 2018 to be a year of recovery across many of the company's end markets and restructuring efforts leading to 20+ percentage incrementals, the firm expects 2018 earnings per share to come in at an above-consensus $8.96.

At last check, Cummins shares were up 3.08 percent at $128.09.

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