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Studies Boost On-Road, Off-Road Natural Gas Chances: Cummins Inc. (CMI), PACCAR Inc (PCAR), Navistar International Corp (NAV)

A pair of studies released at the end of February project U.S. natural gas production will grow for the next 30 years, putting enough downward pressure on prices to boost demand in the on-road and off-road transportation markets. These sectors are seeing plenty of new products that use the fuel. But they’ve only tentatively embraced them so far, even though it is cleaner than petroleum fuels and as much as 25% cheaper.

However, the promise of an ongoing, low-cost natural gas supply could change that.

Cummins Inc. (NYSE:CMI)This would be good news for a handful of companies that are aggressively building leadership positions in various development, distribution and end-use markets serving the transportation industry. With natural gas prices already the lowest they’ve been in a decade, the time may soon be right for the array of products and services they’re offering.

I offer my take on the top on-road and off-road players below. For a look at some leading companies in production, delivery and design in this space, and details on a pair of new studies suggesting a bright future for U.S. natural gas, click over to this post.

Four companies positioned to benefit

A number of major Class 8 truck manufacturers have announced plans to introduce Liquid Natural Gas, or LNG, engines for North American 18-wheelers in 2013. The leader among them continues to be PACCAR Inc (NASDAQ:PCAR). This company has been making natural gas-powered vehicles since 1996 and currently claims 40% of the market. In its fourth-quarter earnings report in late January it said it produced over 1,400 of these vehicles in 2012. It also said this year it is offering six new models in its Kenworth and Peterbilt lines, available with either 9-liter or 15-liter natural gas engines.

Another company to watch in this segment is Navistar International Corp (NYSE:NAV). Navistar’s integrated truck-and-engine business has struggled in the marketplace and with investors over the past several years. But one was it is trying to pull itself back up is by introducing several new LNG models this year. It has also partnered with Clean Energy Fuels Corp. (NASDAQ:CLNE), the leading operator of highway-based natural gas filling stations in the U.S., to promote the fuel within the heavy-duty trucking industry. Freightliner Trucks, the largest division of Daimler Trucks North America, is also offering several new trucks and tractors that run on LNG in 2013.

Turning to the off-road market, Caterpillar Inc. (NYSE:CAT) is probably the firm banking the most on a move away from traditional petroleum fuels — and probably the one that stands to benefit most as a result. Its upcoming natural gas products range from giant haul trucks to railroad locomotive engines. This lineup includes three of Cat’s most popular off-highway mining trucks, as well as kits to convert existing diesel-powered oilrigs, trucks and locomotives to LNG.

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