By: Rob Wertheimer
There will probably be more people live blogging the Tesla truck launch event tonight at 11 EST than the Cummins Analyst day here in Indianapolis, though there will be a lot of talk on electric trucks in both.
Cummins’ investor day highlighted high ROIC achievement, willingness to be flexible on cash returned to shareholders (50% is the plan, they’ve been above that in recent years, and could go below if better opportunities present). All that is fair and impressive, but one reason for high ROIC is low redeployment of capital. This is the issue in all industrials, in a way. Industrial core businesses have consolidated and specialized to create attractive pools of returns, with high aftermarket or otherwise relatively limited competition in varied pockets. But redeploying capital to grow is harder; quality targets who are willing sellers are hard to find. And, buying assets at market value rather than historical value means marking target ROIC to market, effectively lowering headline returns in exchange for growth.