Big Time Diesel

Originally I had planned to do an article about the biggest large diesel engine manufacturers, but as far as public companies go it really turned into a two horse race between Caterpillar and Cummins (every other manufacturer is either privately owned or not on a North American Exchange). The five biggest diesel engine manufacturers are: Caterpillar, Cummins, JCB, Kubota Group, and YANMAR. These are largely looking at the construction side as well as the use of their engines in other things such as gen sets, off shore rigs, and semi trucks. Liebherr and Komatsu are also big diesel engine makers but more so for mining and agriculture. Liebherr is privately owned and Komatsu is only traded on the Tokyo exchange. JCB is also privately owned and has been around since 1945. Kubota is also only traded on the Tokyo exchange and YANMAR is a privately owned Japanese company. I will probably do a different article comparing CAT and Deere & Co. (John Deere) at some point because they also compete a lot with each other, but I wanted to focus more on diesel engines specifically for this article.

Since CAT and Cummins are the only two public companies and they do compete with each other in some markets I figured I would do a small CAT vs. Cummins breakdown. Obviously CAT is a much larger company, (almost 3 times the size to be exact), Cummins has actually been around a little longer and actually dominated the diesel market for a long time and at least in the smaller pickup truck market arguably still do.

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Caterpillar Inc. (CAT. NYSE)- is an American Fortune 100 corporation that designs develops, engineers, manufactures, markets and sells machinery, engines, financial products and insurance to customers via a worldwide dealer network. They also have numerous ‘child’ companies that are also publicly traded, Finning International (FTT) and Toromont Industries Ltd. (TIH) to name a few. They are the largest construction equipment manufacturer in the world. They are also part of the Dow Jones Industrial Average and are one of Bill Gates largest stock holdings aside from Berkshire Hathaway (if you care about that). CAT has been around since 1925 and is headquartered in Deerfield, Illinois. CAT makes diesel engines all the way from the C0.5 13.7 Horsepower 22lb-ft 31 cubic inch engine to the 3616 6600Horsepower 35,700lb-ft 1800 cubic inch beast. Their engines are used in everything from little generators, to offshore rigs, to marine engines. Basically any heavy industry will have a CAT engine that will work for it.

They are one of the many companies that are at or near a 52 week high right now. This is largely due to the fact that oil prices are going up as well as the fact that they are diverse enough that Covid didn’t hit them quite as bad as a lot of other companies. CAT is one of those companies I keep thinking about adding to my watch list but never do because the price always seems too high, but then they keep going up and I keep not adding them to my list. They are up 30.6% for the past year not including dividends.

Caterpillar Inc. (CAT)- $197.54 per share/ $107.32 Billion market cap/ 32.85 P/E Ratio/ $6.01 EPS/ $4.12 per share Dividend/ 2.09% Dividend Yield.

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Cummins Inc. (CMI.NYSE)- Is an American multinational corporation that designs manufactures and distributes engines, filtration, and power generating products. Cummins also services engines and related equipment including fuel systems, controls, air handling, filtration, emission control, electrical power generation systems and trucks. They are headquartered in Columbus, Indiana. Cummins sells in approximately 190 countries and territories through 600 company-owned and independent distributors and approximately 6000 dealers. Cummins was founded in Columbus, Ohio in 1919, which makes them older than Caterpillar by 6 years. They had more than half the heavy-duty truck market in the US from 1952-1959. They also have a slight advantage over CAT in the truck market as they sell engines for light and heavy duty on road trucks as well as the off-road stuff, while CAT only sells diesel engines for off-road equipment currently. Once emission standards are the same across the board for on and off road I would look to see if CAT decides to get into the heavy on road engines again.

Cummins is also near their 52 week high, right now which is largely due to increasing oil prices but also due to the fact that a lot of the market is running on, or near new highs right now. Cummins was hit pretty hard by Corona along with everyone else, but is one of those companies that has recovered and then some. They have been on my watch list for a while but are just a little expensive for my tastes to pull the trigger on a buy with a P/E ratio of 22.8. They are up 41.8% in the past year not including dividends.

Cummins Inc. (CMI)- $242.03 per share/ $35.82 Billion Market Cap/ 22.80 P/E Ratio/ $10.61 EPS/ $5.40 Dividend per share/ 2.23% dividend Yield

In my opinion either of these companies are a good long term buy. Both companies have been around and making money for a long time and both companies are positioned fairly well to transition to electric drive if or when this occurs. CAT already sells electric versions of some of their models and Cummins has designed their owned electric semi and sells electric drive systems for semi trucks as well. I would say Cummins is a slightly better buy right now just due to their lower price to earnings, but these are definitely two companies worth keeping an eye on in the future.

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Disclaimer: Cummins is on my watchlist as well as Finning International. All stock prices are as of January 12, 2021.

Published by Colby McTavish

I am a Third year Heavy Equipment Technician. I also have a diploma in business management from MacEwan university. I have 2 children. In my spare time I race stock cars, play ball hockey, trade stocks and work on vehicles when I am not hanging out with my kids and my other half.

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