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Cummins (CMI) Sanctions Share-Buyback Program Worth $2B

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Cummins Inc. (CMI - Free Report) recently disclosed that its board of directors has authorized a common stock repurchase program of $2 billion.

This announcement comes in as the company concludes its prior authorization of $2 billion, announced in 2019.

The latest share repurchase program reiterates Cummins’ commitment to boosting shareholders’ value and showcases its confidence in its long-term performance.

Headquartered in Columbus, IN, Cummins is a leading global designer, manufacturer and distributor of diesel and natural gas engines and powertrain-related component products. The company offers products to original equipment manufacturers (OEMs), distributors and dealers through a diversified network of company-owned and independent distributor facilities over 9,000 dealer locations.

The company’s efforts and investments to ramp up its fuel cell and hydrogen production technology capabilities are commendable. Cummins has distinct hydrogen capabilities, spanning from fuel production to storage and vehicle power. It is rapidly fortifying its capabilities to provide hydrogen technologies at scale, which is crucial to the world’s green energy transition through the hydrogen economy. Moreover, Cummins is playing a pivotal role in advancing the hydrogen ecosphere, including hydrogen engines, fuel cells, electrolyzers and storage tanks, and has deployed more than 600 electrolyzers across 100 countries.

Cummins’ investor-friendly moves are praiseworthy. In July, Cummins’ management approved a quarterly cash dividend of $1.45 per share, marking an increase of 7% from the previous $1.35. This dividend announcement marked the 12th consecutive year of dividend increase for Cummins, outlining the company’s consistent practice of returning wealth to shareholders while ploughing back some profits for the future. In the first nine months of 2021, the firm returned $1.83 billion to shareholders via dividends and buybacks, consistent with its target of returning 75% of operating cash flow to investors in 2021. Cummins’ return on equity (ROE) of 25% compares favorably with the sector’s 15%. Further, the company’s annual dividend of $5.80 per share currently reflects a dividend yield of 2.65%, comparing favorably with the sector’s 0.65%. This demonstrates management’s approach to efficiently and timely reward shareholders.

However, Cummins projects the global microchip deficit to pose challenges for the firm and expects the supply-chain constraints to persist through 2021. Further, rising capex as well as high launch and operating costs are likely to mar Cummins' margins going forward.

Zacks Rank & Key Picks

Cummins currently carries a Zacks Rank of 3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A few better-ranked stocks in the auto space include Goodyear Tire (GT - Free Report) , Tesla (TSLA - Free Report) and Harley-Davidson (HOG - Free Report) , all of which flaunt a Zacks Rank of 1.

Goodyear has an expected earnings growth rate of 196.86% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 80 cents over the last 60 days.

Goodyear beat the Zacks Consensus Estimate for earnings in the last four quarters. GT has a trailing four-quarter earnings surprise of 228.45%, on average. Its shares have rallied 91.3% over the past year.

Tesla has an expected earnings growth rate of 166.96% for the current year. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 62 cents over the last 60 days.

Tesla beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. TSLA has a trailing four-quarter earnings surprise of 25.38%, on average. Its shares have rallied 56.7% over the past year.

Harley-Davidson has an expected earnings growth rate of 34.92% for the current quarter. The Zacks Consensus Estimate for its current-year earnings has been revised upward by 32 cents over the last 60 days.

Harley-Davidson beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. HOG has a trailing four-quarter negative earnings surprise of 138.45%, on average. Its shares have risen 4.2% over the past year.