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6 Stocks to Benefit From Truckers' Switch to Natural Gas

Written by: Frank Byrt 04/30/12 - 8:51 AM EDT
Tickers in this article: CMI NAV CLNE PCAR QTWW

For one thing, engine makers, such as Cummins(CMI) , already the leading natural-gas heavy-engine maker, and truck makers, such as PACCAR(PCAR) , are seeing such big demand from truck-fleet managers that they are shifting production capacity to build more engines and trucks that burn CNG or LNG.

"We expect this sector to be a growth driver for both companies, though (it's) starting off a pretty small base at present," said Jim Corridore, an S&P Capital IQ equity analyst, in a research note. "These trucks and their engines are priced at a significant premium to diesel engines, but they can provide savings since there is such a big divergence between the cost of natural gas and the cost of diesel fuel."

Others are seen to benefit as well. Clean Energy Fuels(CLNE) , originally backed by financier and natural gas advocate T. Boone Pickens, said in February that it has partnered with truck maker Navistar International(NAV) to offer customers a comprehensive engine/truck/fuel package. Customers can lease natural gas fueled trucks from Navistar (powered by a Cummins engine), as well as contract for fuel bought from Clean Energy's 257 fueling stations.

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Clean Energy also plans to build a network of 150 LNG truck-fueling stations along major truck routes that will allow LNG-powered trucks to travel coast-to-coast.

And Canada's Westport Innovations(TSX:WPT) , a developer of natural-gas fuel-injection technology, is in a joint-venture deal with Cummins to design an engine, based on a Cummins diesel engine, that will burn CNG, LNG or bio-methane. It is expected to come to market early in 2013.

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Here are six stocks that should benefit from the trucking industry's shift from diesel fuel to natural-gas in the coming years:

1. Cummins(CMI)

Company profile: Cummins, with a market value of $23 billion, makes diesel and natural gas engines, electric power generation systems, and engine-related products. The firm sells to original equipment manufacturers and distributors, including PACCAR and Daimler.