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Five senior Cummins Inc. executives within the past week have sold more than 23,000 shares worth nearly $2.8 million.
The information about the sales came from filings with the Securities and Exchange Commission. Certain executives have to report their stock sales to the SEC.
Cummins officers “are only allowed to sell shares after they have satisfied their officer shareholding requirements and when they have been through an internal review process to ensure that they do not have any material, non-public information,” Jon Mills, director of external communications, said via email.
“These sales can only take place during open trading windows that follow the company’s public release of its earnings,” Mills said.
Cummins announced earnings Feb. 6. The stock sales by the executives were filed beginning Feb. 8.
They ranged from the sale of 3,000 shares, valued at about $360,000, by Chief Administrative Officer Marya Rose, to two sales of a combined 8,130 shares, valued at nearly $970,000, by Chief Technical Officer John Wall.
Rose’s sale was triggered by the stock price reaching $120. The trigger mechanism allows executives to sell shares without violating insider-trading rules.
It also assures investors that executives are selling the stock without any information investors do not have.
The SEC rule that allowed for such triggered sales was put into place “to eliminate the uncertainty that has arisen as to whether it is necessary to prove that a person actually used inside information or whether it is sufficient simply to show that the person traded while aware of such information.”
Mills said the other sales “were the result of the officers wishing to diversify their holdings by selling shares as part of their normal financial planning.”
Shares on Friday closed up 48 cents at $119.21, about $10 below a 52-week high.
Craig Kessler, president and chief investment officer of Columbus-based Kessler Investment Group, said that as the stock price nears a record, the likelihood of shareholders selling some of their stock increases. That is particularly true for the company’s officers, who have restrictions about when they can sell.
“There’s not a lot there that would suggest that we’re getting a read on Cummins’ future by the action of a few executives selling their stock,” he said.
If many of the executives were buying — rather than selling — stock, that might provide some compelling information, Kessler said.
“Their selling doesn’t carry the same weight because there are so many reasons (to sell),” he said.
From estate planning to a child’s college education expenses to a personal purchase, the executives may have numerous valid reasons to sell shares — without the sale providing any insight into their confidence in the company’s future, Kessler said.
Steve Meredith, a financial consultant with Hilliard Lyons in Columbus, said the 21 analysts who follow Cummins’ stock appear to be projecting that any decline in stock price would be temporary. Thirteen still rate the stock as a buy, and four a strong buy, Meredith said.
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