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Cramer: Buy This Truck Company

Cramer has always said you have to listen to what individual companies say when it comes to picking stocks. To prove his point, he took a look at two very different truck companies: Navistar and Cummins.

Cummins had an incredibly bullish analyst day Tuesday, while Navistar reported a big earnings miss and cut its forecasts for all of 2011.

What’s the reason for the big divide? It’s simple, the “Mad Money” host said. Navistar has been struggling with market share in part because its engines are viewed as being less fuel efficient. Cummins, on the other hand, is the “best of breed” in the truck engine space.

And Cramer thinks things will continue to look up for Cummins.

“They’re the technology leader,” he said. “I think the company will keep growing thanks to powerful big picture themes, like changing standards for emissions and fuel economy all over the world and a truck replacement cycle that’s natural because it’s brought on by an aging global truck fleet.”

The company has increased its sales outlook for 2015 to $30 billion, and expects its earnings before interest and tax margins to expand from 14.5 percent now to 18 percent in 2015. But most important, management thinks they can earn $20 a share in 2015, more than double this year’s consensus earnings estimate of $9.05.

Navistar, however, is fundamentally flawed, Cramer said. Not only are its truck engines viewed as less fuel efficient and more expensive than the competition, it has an issue with its defense business. The company has become the largest supplier of mine-resistant vehicles for the troops in Iraq. But as the government transitions to the next generation of vehicles, Navistar will be left with a “gaping hole” in its bottom line, Cramer said.

“When it comes to the truck business, don’t take your cue from a loser like Navistar, especially not when a best of breed outfit like Cummins tells you business is on fire,” he said. “I still think Cummins is a raging buy, but you can afford to be patient and take your time building a position.”

Call Cramer: 1-800-743-CNBC

When this story was published, Cramer’s charitable trust owned Cummins.

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