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Cummins Inc. (CMI), Navistar International Corp (NAV), PACCAR Inc (PCAR): This Stock Has Just Stepped on the Gas

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After a hefty run-up for months, the recent weakness in the Dow Jones Industrials has left investors wondering whether a sharp pullback is on its way. How long the bull market will last is anyone’s guess, but there’s one stock that’s not only holding up strong but also looks poised to hit a new high anytime soon.

Image source: Company website.

I’m talking about Cummins Inc. (NYSE:CMI). While the engine maker’s last quarterly numbers weren’t the kind to get investors excited, they did leave the Street impressed. But those numbers have little to do with what I have to tell you about Cummins today.

Cummins rules the roost

One critical reason Cummins Inc. (NYSE:CMI) excites me is that its engines dominate the North American truck market. Better yet, Cummins is gaining market share rapidly, thanks largely to the failure of rival Navistar International Corp (NYSE:NAV)‘s emissions technology in 2012.

Navistar International Corp (NYSE:NAV)’s sales plunged even as its warranty claims hit a new high last year, after its technology failed to get the U.S. Environmental Protection Agency’s clearance. To save the company, and with no other option left, Navistar’s management decided to get Cummins Inc. (NYSE:CMI)’ tried-and-tested engines back into its International brand trucks. The decision paid off, because over the past seven months, Navistar International Corp (NYSE:NAV) has already bagged more than 10,000 orders for trucks fitted with Cummins’ ISX15 engines.

With Navistar International Corp (NYSE:NAV) back as its customer and with a strong response to its heavy-duty ISX15 engines launched last year, Cummins Inc. (NYSE:CMI) is targeting 40% market share in the North American heavy-duty truck market for 2013. While that’s a 1-percentage-point improvement over last year, Cummins might end up doing even better, especially as it ramps up production of its much-anticipated 12-liter engines.

Ready for the next big thing?

After the successful launch of the ISX 15-liter engine, ISX12G is the next big product from Cummins Inc. (NYSE:CMI)’ house to have caught the market’s attention. Several companies, including Eaton, Freightliner, and PACCAR Inc (NASDAQ:PCAR), have already lined up to take delivery of the 12-liter engines that are built using Westport Innovations Inc. (USA) (NASDAQ:WPRT)‘ proprietary natural gas technology.

In fact, Westport Innovations Inc. (USA) (NASDAQ:WPRT), which has a long-standing relationship with Cummins, expects the ISX12G to be “the strongest product that CWI has ever launched.” CWI, the Cummins-Westport joint venture, recently reported a record second quarter, with a 38% jump in engine shipments, year over year, backed by strong demand for the newly launched ISX12G engines from North American trucking customers.

Leading the way

For Cummins investors, these two engines mean excellent opportunities and, hence, great growth prospects for the company in the near future. More importantly, they are likely to ensure that Cummins remains at the forefront in the heavy-duty truck market.

The best part, though, is that Cummins’ leadership isn’t restricted to the heavy-duty segment alone. The engine maker enjoys an even bigger slice of the medium-duty truck market in North America. Following an 18% climb in year-over-year engine shipments to the segment in the last quarter, Cummins now expects to end the year with a handsome 60% share in the medium-duty truck market. That’s a sizable 8-percentage-point improvement over last year’s share, and a mind-boggling 22 percentage points gain in just five years’ time.

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