We recently compiled the 10 Best Hydrogen and Fuel Cell Stocks to Buy. In this article, we are going to take a look at Cummins Inc. (NYSE:CMI) against the other hydrogen and fuel stocks.
Global Warming Driving the Hydrogen Market
As of 2024, climate change has become an increasingly significant issue globally, as June in 2024 was the warmest month in the 175 year old history of NOAA National Centers for Environmental Information’s data record. Since carbon emissions is one of the driving factors for such a massive global impact, hydrogen, one of the biggest green & clean energy sources, is expected to see an upward trajectory in its market growth in the coming years. As such, its production and consumption are on the rise.
Therefore, the global hydrogen generation market, which stood at the $148 billion mark in 2023, is on its way to hitting $259 billion by 2033, growing at CAGR of 5.75%. Furthermore, BloombergNEF expects the hydrogen supply to grow thirty-fold to 16.4 million metric tons per year by 2030; however, they expect 30% of this planned supply to be achieved by 2030 mainly because of longer project timelines and unstable policy support. This supply is driven by the demand coming from electrolysis, which makes up most of the demand; also, blue hydrogen is pushing up the demand for hydrogen.
In terms of the countries’ share of this global supply, the U.S. is expected to account for 36% of this forecasted supply by 2030, thanks to the fact that most mature projects exist in the country, along with favorable tax policies. Moreover, China, Europe, and the U.S. would all together account for most of this supply by 2030 – 80% of the global supply to be exact. Moreover, the U.S also delivers over half of the world’s fuel cell vehicles, and is responsible for the production of 25,000 fuel cell material handling vehicles, over 8,000 small-scale fuel systems in the country, and over 550 MW of large-scale fuel cell power under planning or already installed, according to The Fuel Cell and Hydrogen Energy Association (FCHEA).
China Leading the Game of Hydrogen
On the other hand, China is leading in the game of electrolysis projects, meant for the production of hydrogen, as it owns 40% of these projects that have reached their Final Investment Decision (FID) globally. Kuqa electrolyzer in Xinjiang, which reached its completion in late June 2024, is the largest electrolysis project in the world, with a capacity to produce 200,000 tons of hydrogen per annum, on the back of the 250-megawatt electrolyzer powered by solar energy.
Germany Coming into the Play
Whereas, on the European front, Germany is leaping forward in the electrolysis market, as its government was seen to be confirming funding of two large hydrogen projects, worth $674 million. Similarly, The U.S. Department of Energy announced in March 2024 its plans to invest $750 million in the hydrogen projects, to bring down costs of clean hydrogen and up the advanced electrolysis technologies.
Therefore, with this analysis of the hydrogen market in the bag, it’s quite necessary to conduct an analysis of the best hydrogen and fuel cell stocks to buy right now, so that we can capitalize on this market growth in the coming time. Thus, let’s jump to our list of the 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Methodology
To curate our list of 10 Best Hydrogen and Fuel Cell Stocks to Buy, we gathered a list of all companies with a significant presence in the hydrogen and fuel cell industry. We then further narrowed down on the basis of their upside potential and ranked the finest remaining companies by their number of hedge fund holders as of Q1, 2024, using Insider Monkey’s database that tracks the activity of 920 hedge funds. For stocks with equal number of hedge fund holders, we used their upside as the tiebreaker. With this let’s now jump to our list of the 10 Best Hydrogen and Fuel Cell Stocks to Buy.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A mechanic standing proudly in a factory floor surrounded by the engines the company produces.
Cummins Inc. (NYSE:CMI)
Number of Hedge Fund Holders: 32
Cummins Inc. (NYSE:CMI), an American company, makes diesel and natural gas engines, hybrid and electric powertrains, and related components, while also taking charge of distribution and servicing activities. It has 5 segments: Engine, Distribution, Components, Power Systems, and Accelera. Through its Accelera segment, it operates in the hydrogen market, by producing hydrogen for power purposes. Cummins Inc. (NYSE:CMI) is ranked among the largest automotive companies and suppliers in the world.
The company has seen its demand stay strong for its products in the current year which has led the company to an impressive performance in the first quarter of 2024. The company saw its EBITDA increase from $1.4 billion in the period a year ago to $2.6 billion in the 1st quarter. This was primarily due to growth in the North American power generation segment which experienced a cool 21% increase in revenue for the period, the demand most driven by data centers. This quarterly performance follows an impressive yearly performance in 2023, wherein the company recorded revenue of $34.1 billion, which was up by 21% from the previous year on the back of soaring revenue from the North American segment (22% increase in revenue) and international market performance (20% increase in revenue).
On May 24, 2024, Accelera™ by Cummins unveiled updated models of its hydrogen fuel cell engines for commercial vehicles at the Advanced Clean Transportation (ACT) Expo in Las Vegas, driving its name in the decarbonizing technologies market. Furthermore, in June 2024, Accelera entered into a joint venture, “Amplify Cell Technologies”, with Daimler Trucks and PACCAR. This joint venture targets the electric commercial vehicles market by providing battery cells. Using this joint venture, the 21-gigawatt hour (GWh) factory is set to be constructed soon, details of which haven’t been disclosed yet.
The company has also increased its quarterly dividend from $1.68 to $1.82 per share, which is next going to be paid in September this year. The company has consecutively increased the dividend for the past 15 years, which means the stock also holds a lot for investors looking for dividend-paying stocks.
As such, the stock has been flowing positively in the investor’s eyes as well, as the stock price soared by 19.43% on a YTD basis. Furthermore, the analysts are seeing the stock going as high as $321 in the next twelve months, as compared to its current price of $286, as of writing this article; that means an upside of 12.2%. The analysts are also thinking quite highly about the earnings of the company in the current year, as they see it soaring high to $18.92 in 2024 from last year’s EPS of $5.2; the company’s earnings per share for the first quarter of this year was recorded at impressive $5.1 per share.
However, the separation of its Atmus Filtration business resulted in a net gain of $1.3 billion in transaction costs and other expenses, and a $29 million increase in its restructuring expense. Atmus Filtration Technologies reported net sales of $400 million for the full year 2023, at the end of which it was separated from Cummins. Thus, the business impact of this divesture shall be brought under consideration by the investors as the company expects its aggregate revenue down by 2% to 5% this year due to this factor.
As such, the stock has been flowing positively in the investor’s eyes as well, as the stock price soared by 19.43% on a YTD basis. Furthermore, the analysts are seeing the stock going as high as $321 in the next twelve months, as compared to its current price of $286, as of writing this article; that means an upside of 12.2%. The analysts are also thinking quite highly about the earnings of the company in the current year, as they see it soaring high to $18.92 in 2024 from last year’s EPS of $5.2; the company’s earnings per share for the first quarter of this year was recorded at impressive $5.1 per share.
However, the separation of its Atmus Filtration business resulted in a net gain of $1.3 billion in transaction costs and other expenses, and a $29 million increase in its restructuring expense. Atmus Filtration Technologies reported net sales of $400 million for the full year 2023, at the end of which it was separated from Cummins. Thus, the business impact of this divesture shall be brought under consideration by the investors as the company expects its aggregate revenue down by 2% to 5% this year due to this factor.
Overall CMI ranks 8th on our list of the best hydrogen and fuel cell stocks to buy. You can visit 10 Best Hydrogen and Fuel Cell Stocks to Buy to see the other hydrogen and fuel cell stocks that are on hedge funds’ radar. While we acknowledge the potential of CMI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CMI that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.