Thursday, July 15, 2010

Citigroup (NYSE:C) Prefers Cummins (NYSE:CMI) Over Caterpillar (NYSE:CAT)

Citigroup analysts maintained their "Hold" rating on Caterpillar (NYSE:CAT), while at the same time saying they prefer competitor Cummins (NYSE:CMI) in the heavy machinery sector.

“Following recent positive revisions to Cummins (NYSE: CMI) estimates, we raise our 2010 EPS est. on CAT to $3.25 (from $3.05) largely on better near-term growth in key emerging markets. Note key competitor, Komatsu, today raised its FY3/11 sales forecast by 3% (entirely in its 1H ending 9/30; 2H was left unchanged), and noted demand for construction and mining equipment is currently running well ahead of its previous outlook in Asian and Latin American markets.”

“CMI Remains Our Favorite Heavy Machinery Play – While both CAT and CMI stand to benefit from emerging market growth theme, we continue to prefer shares of CMI (today raised dividend 50%) over CAT, as we expect CMI’s key developed world end-markets (notably N.A. heavy truck) to rebound more quickly than CAT,” said Citi.

Even so, Citigroup did raise their price target on Caterpillar from $68 to $71.

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