PACCAR Inc (PCAR), Cummins Inc. (CMI): Are We Going Overboard With the Natural Gas Hype?

Page 1 of 2

What do you make of a situation when a company that dominates the heavy-duty natural-gas truck market in the U.S. says stuff about the gas that’s anything but exciting? A pin-popping balloon? Quite like, especially after the hullabaloo President Obama’s re-election as POTUS has created over the fuel.

I follow companies like PACCAR Inc (NASDAQ:PCAR) and Cummins Inc. (NYSE:CMI) closely and never miss either’s earnings release, not for numbers as much as for what they have to say about how things are shaping up in the natural-gas fuel market. Both companies have huge stakes in this space, so naturally, their views are important. While Cummins is yet to report numbers (as of this writing), PACCAR seems to be low on gas right now, and seems to be focusing on some other fuel instead.

PACCAR Inc (NASDAQ:PCAR)Year in focus

40% of the heavy-duty trucks that run on gas in the U.S. today belong to PACCAR. Now that’s a huge competitive advantage to have in an area that’s getting increased attention. Interestingly, many are pegging heavy-duty and long haul trucks to make a major headway into natural gas in 2013, and that includes the innovator that has mastered the art of enabling gasoline engines to run on natural gas – Westport Innovations Inc. (USA) (NASDAQ:WPRT).

Westport forecasts as many as 16 truck models from various companies to opt for its new natural-gas engine this year. PACCAR itself decided to fix two of its latest truck models under brands Peterbilt and Kenilworth with the heavy-duty ISX 12G engine last year. This engine is one of the most advanced products to be launched by Westport in collaboration with Cummins under their 50:50 joint venture, and is expected to go into full production soon (Cummins’ forthcoming earnings call should provide updates on this). Westport has high hopes from this new engine, and is confident it will be a huge hit. Obviously, it counts PACCAR as an important customer. But wait: the customer doesn’t sound as upbeat.

The unexpected?

When an analyst asked PACCAR’s management whether it really sees long-haul trucks making headway into natural gas this year, this is what he got for a reply:

If the infrastructure and a major company, whether it’s in the resource industry or somebody else, makes a(n) investment to allow online, highway, natural gas trucks, we’re ready for that. That’s all we can do. We’re ready. We’re the leader. So we’re excited about it. But until that happens, we’ll continue to sell to people that have other requirements in the industry, which is diesel. It’s a wonderful fuel and it’s very productive.”

So PACCAR doesn’t really see trucks taking off on gas unless infrastructure builds up for support. Not this year, at least. Is Westport listening?

What about diesel? PACCAR sounded pretty excited about it. Curiosity fired, I brought out my search glasses when I chanced upon this piece from Forbes, according to which sales of diesel vehicles shot up almost 28% during the first six months of 2012. Good news, but the article also mentions another interesting fact — only one commercial vehicle seems to be better off when run on diesel instead of gas in terms of cost savings.

Ironically, even the loner on the list – Ford Motor Company (NYSE:F)’s F-series pick-up –is giving gas a harder push. The auto maker’s truck sales were up 7% in 2012, and it has just pitched two more pick-ups with Westport’s WiNG Power System that enables a gasoline truck to run on gas. The immensely-popular F-series continue to be “America’s best-selling pickup,” and also happen to be Ford’s profit machines.

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!