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Prudential Keeps 'Buy' on Cummins


Prudential keeps its buy rating on Cummins (CUM).

On Wednesday the company announced consolidation and job cuts. Analyst Andrew Casey says the consolidation of its heavy truck engine assembly and test operations from Indiana to New York is "significant." He estimates that consolidation will remove approximately $5 million pretax per quarter from the Engines business cost structure, beginning in the second quarter of 2003. This equates to a 2003 earnings per share improvement of $0.25-$0.30.

Casey says net reduction in Cummins' heavy duty workforce of 200 will disproportionately impact Indiana, meaning nothing will be spared in the company's drive to improve profitability. He notes that no charge is expected, and minimal cash will likely be consumed with the relocation. Casey sees $0.76 2002 earnings per share, and $2.60 for 2003.


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