Cummins (NYSE: CMI) and Valmont Industries (NYSE:VMI) are both mid-cap auto/tires/trucks companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, dividends, profitabiliy, risk and earnings.

Insider and Institutional Ownership

80.2% of Cummins shares are owned by institutional investors. Comparatively, 84.4% of Valmont Industries shares are owned by institutional investors. 0.6% of Cummins shares are owned by insiders. Comparatively, 3.3% of Valmont Industries shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Dividends

Cummins pays an annual dividend of $4.10 per share and has a dividend yield of 2.5%. Valmont Industries pays an annual dividend of $1.50 per share and has a dividend yield of 1.0%. Cummins pays out 47.0% of its earnings in the form of a dividend. Valmont Industries pays out 18.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Cummins has raised its dividend for 7 consecutive years. Cummins is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Cummins and Valmont Industries’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Cummins $17.81 billion 1.56 $2.36 billion $8.73 19.07
Valmont Industries $2.64 billion 1.32 $344.71 million $8.07 19.15

Cummins has higher revenue and earnings than Valmont Industries. Cummins is trading at a lower price-to-earnings ratio than Valmont Industries, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Cummins has a beta of 1.08, meaning that its stock price is 8% more volatile than the S&P 500. Comparatively, Valmont Industries has a beta of 0.97, meaning that its stock price is 3% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations for Cummins and Valmont Industries, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cummins 1 9 5 0 2.27
Valmont Industries 0 2 1 0 2.33

Cummins presently has a consensus price target of $150.54, indicating a potential downside of 9.57%. Valmont Industries has a consensus price target of $171.00, indicating a potential upside of 10.68%. Given Valmont Industries’ stronger consensus rating and higher possible upside, analysts clearly believe Valmont Industries is more favorable than Cummins.

Profitability

This table compares Cummins and Valmont Industries’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cummins 8.25% 20.87% 9.99%
Valmont Industries 6.94% 14.89% 6.29%

Summary

Cummins beats Valmont Industries on 11 of the 17 factors compared between the two stocks.

Cummins Company Profile

Cummins Inc. designs, manufactures, distributes and services diesel and natural gas engines and engine-related component products. The Company’s segments include Engine, Distribution, Components and Power Systems. The Engine segment manufactures and markets a range of diesel and natural gas powered engines under the Cummins brand name, as well as certain customer brand names, for the heavy and medium-duty truck, bus, recreational vehicle (RV), light-duty automotive and agricultural markets. The Distribution segment consists of the product lines, which service and/or distribute a range of products and services, including parts, engines, power generation and service. The Components segment supplies products, including aftertreatment systems, turbochargers, filtration products and fuel systems for commercial diesel applications. The Power Systems segment consists of businesses, including Power generation, Industrial and Generator technologies.

Valmont Industries Company Profile

Valmont Industries, Inc. is a producer of fabricated metal products, and steel, aluminum and composite pole, tower and other structures, and mechanized irrigation systems. The Company’s segments are Engineered Support Structures (ESS); Utility Support Structures; Energy and Mining; Coatings; Irrigation, and Other. The ESS segment manufactures steel, aluminum, and composite poles and structures. The Utility Support Structures Segment manufactures steel and concrete pole structures for electrical transmission, substation and distribution applications. The Energy and Mining Segment produces access systems, which are engineered structures and components that allow people to move safely in an industrial, infrastructure or commercial facility. The Coatings Segment consists of galvanizing, anodizing and powder coating services on a global basis. The Irrigation Segment manufactures and distributes mechanical irrigation equipment and related service parts under the Valley brand name.

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