Cummins
CMI
$531.33
-0.26%
Cummins Inc. designs and manufactures diesel and alternative-fuel engines, powertrain components (filtration, turbochargers, aftertreatment, fuel systems, transmissions), and power generation equipment for heavy- and medium-duty trucks, off-highway machinery, locomotives, and standby/prime power applications, operating in the global Industrial Machinery sector with roughly 60% of sales in the US and Canada and 40% internationally, much of it through joint ventures in China and India. Its 650 distributors and more than 19,000 dealer locations across 190 countries give it an unusually dense service and aftermarket moat, and its vertically integrated components business (Components, Distribution, Engine, Power Systems, and the Accelera zero-emissions unit) makes it a platform-like supplier that, uniquely, competes with many of the truck OEMs that are also its customers. The current investor debate centers on whether Cummins can convert the data-center-driven power generation boom and its Accelera electrification investments into durable growth while navigating a cyclical North American truck market, tariff and emissions-regulatory uncertainty, and the margin drag from early-stage zero-emission programs. Recent quarterly results showed revenue growth reaccelerating to roughly 9% year over year with record quarterly EPS, yet the stock has de-rated sharply since mid-summer as investors question the sustainability of power systems demand and the pace of the 2027 emissions-standard transition.…
CMI
Cummins
$531.33
Related headlines
CMI 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Cummins's 12-month outlook, with a consensus price target around $716.66 and implied upside of +34.9% versus the current price.
Average Target
$716.66
0 analysts
Implied Upside
+34.9%
vs. current price
Analyst Count
—
covering this stock
Price Range
$530 - $890
Analyst target range
Coverage is robust with 19 analysts, and the consensus recommendation is "buy" with a mean rating of 1.82 (where 1.0 is a strong buy), reflecting a bullish tilt. The average target price of $721.14 implies roughly +35.7% upside from the current $531.33, a wide gap that suggests analysts have not yet marked their models to the recent price collapse or that the selloff is viewed as overdone. The consensus leans clearly bullish, with the average target well above the current price and estimated EPS averaging $40.34 (range $34.25 to $42.73) on average revenue of $44.78 billion.
The full target range runs from a low of $530 to a high of $890 — a spread of $360, or 68% of the current price — signaling high uncertainty about the outlook. The high target of $890 assumes multiple expansion and accelerating data-center power demand plus a strong 2027 emissions-driven pricing cycle, while the low target of $530 essentially prices in the current price with no upside, reflecting margin compression and cyclical truck weakness. Institutional ratings show recent stability rather than upgrades: JP Morgan reiterated Neutral on 2026-09-23, Evercore ISI maintained Outperform on 2026-08-11, UBS reiterated Buy on 2026-08-05, and Morgan Stanley kept Overweight on 2026-07-17, with UBS's upgrade from Neutral to Buy on 2026-06-08 the most notable positive action. The wide dispersion and the fact that the low target sits at the current price indicate that the market is already discounting the bear case, and a re-rating toward the consensus would require evidence that power systems growth and margin recovery are durable.
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Bulls vs Bears: CMI Investment Factors
The bear case currently has stronger near-term evidence: the stock is down 18.1% over three months, sits at just 39% of its 52-week range, and trades at 24.76x trailing earnings versus ~13x a year ago, leaving little valuation cushion. However, the bull case is grounded in improving fundamentals — 9.4% revenue growth, recovering margins, $3.367 billion of trailing FCF, and a consensus target of $721.14 implying 35.7% upside. The single most important tension is whether the data-center-driven Power Systems boom and the 2027 emissions-cycle pricing can sustain the earnings growth implied by the 15.26x forward PE versus the 24.76x trailing multiple; if forward EPS of ~$40 materializes, the stock is cheap, but if power-systems demand proves cyclical, the de-rating has further to run.
Bullish
- Analyst targets imply 36% upside: With 19 analysts covering the stock and a consensus 'buy' rating (mean 1.82), the average target price of $721.14 sits roughly 35.7% above the current $531.33. Even the low target of $530 is essentially at the current price, meaning the market has already discounted the bear case and any positive surprise would re-rate the stock.
- Revenue reaccelerating to 9.4% growth: Q2 2026 revenue of $9.457 billion grew 9.42% year over year versus $8.643 billion in Q2 2025, a clear inflection after a flat 2025. The trailing four-quarter total of roughly $34.9 billion supports the consensus revenue estimate of $44.8 billion, implying continued mid-to-high-single-digit expansion.
- Margins recovering from Q4 trough: Gross margin recovered to 26.07% in Q2 2026 from a depressed 22.86% in Q4 2025, and operating margin rebounded to 13.52% from 7.50%. Q2 2026 net income of $932 million on a 9.86% net margin and EBITDA of $1.467 billion (15.5% margin) confirm the earnings engine is intact.
- Strong cash generation and balance sheet: Trailing free cash flow of $3.367 billion against a ~$70.4 billion market cap implies an FCF yield of roughly 4.8%, and Q2 2026 FCF of $1.25 billion comfortably covered $276 million of dividends and $225 million of buybacks. Debt-to-equity of 0.657, a current ratio of 1.76, and ROE of 23.0% show a leveraged but well-covered capital structure.
Bearish
- Severe recent momentum breakdown: The stock has fallen 18.1% over three months and 15.3% over six months, with a 29% maximum drawdown from its ~$727 June peak. At $531.33 it sits at roughly 39% of its 52-week range of $405.82 to $737.76, signaling aggressive repricing rather than value discovery.
- Valuation near top of historical band: The trailing PE of 24.76x compares with 12.7x in Q2 2025 and 13.1x in Q1 2025, and the PB of 5.70x is elevated for a capital-intensive manufacturer. The market is pricing in optimistic power-systems and 2027 emissions-cycle expectations, leaving limited margin of safety.
- Accelera remains an immaterial drag: Accelera generated just $145 million of revenue against $9.457 billion total, yet consumes investment and margin. The zero-emission unit is a rounding error on the top line while still weighing on profitability, meaning the electrification thesis is unproven and capital-intensive.
- Wide analyst dispersion signals uncertainty: The target range of $530 to $890 spans $360, or 68% of the current price, reflecting high uncertainty about the outlook. Recent institutional actions were mostly reiterations (JP Morgan Neutral on 2026-09-23) rather than upgrades, suggesting analysts are waiting for evidence.
CMI Technical Analysis
Cummins is in a clear intermediate downtrend within a still-positive longer-term structure: the stock is up 25.7% over the past year but has fallen 18.1% over three months and 15.3% over six months, and at $531.33 it sits at roughly 39% of its 52-week range of $405.82 to $737.76 — closer to the low than the high after peaking near $727 in late June. That positioning signals a market that has aggressively repriced the name lower rather than a value opportunity being discovered; the 29% maximum drawdown confirms a momentum break, though the price remains well above the 52-week low, so the long-term uptrend is wounded, not broken. The 1-year relative strength versus SPY is still +10.2 percentage points, meaning the stock has outperformed the market over twelve months despite the recent slide.
Short-term momentum is stabilizing but not yet reversing: the stock is up 0.73% over the past month versus a 1.22% gain for SPY (relative strength of -0.49), and up 1.78% year to date against SPY's 11.93% (relative strength of -10.15), while the 3-month relative strength of -20.76 and 6-month of -22.76 show severe recent underperformance. The divergence is stark — a positive 1-year return of 25.7% against a negative 3-month return of -18.1% — which typically signals either a mean-reversion bounce or the early stage of a trend reversal, and the flat 1-month action after a steep August-September decline (from ~$648 in mid-July to ~$517 by late September) suggests the selling is decelerating near the $515-$520 area. Volume of about 1.26 million shares and a short ratio of 3.59 days indicate moderate but not extreme bearish positioning, leaving room for either a squeeze or further distribution.
Key technical levels are well defined: support sits at the recent $516-$517 lows (late September/early October), with the 52-week low of $405.82 as the deeper floor, while resistance lies at the $560-$575 zone (the August breakdown area) and then the $648-$660 region that capped the July rebound, with the 52-week high of $737.76 as the major ceiling. A breakout above $575 would suggest the downtrend has exhausted and re-open the path toward $650, whereas a breakdown below $516 would confirm the bearish trend and put the $405.82 low in play. With a beta of 1.238, Cummins is roughly 24% more volatile than the market, so position sizing should account for amplified drawdowns — the 29% peak-to-trough decline is consistent with that beta in a risk-off industrial tape.
Beta
1.24
1.24x market volatility
Max Drawdown
-29.0%
Largest decline past year
52-Week Range
$408-$738
Price range past year
Annual Return
+25.7%
Cumulative gain past year
| Period | CMI Return | S&P 500 |
|---|---|---|
| 1m | +0.7% | +0.2% |
| 3m | -18.1% | +2.9% |
| 6m | -15.3% | +8.4% |
| 1y | +25.7% | +14.9% |
| ytd | +1.8% | +11.9% |
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CMI Fundamental Analysis
Revenue is reaccelerating: Q2 2026 revenue of $9.457 billion grew 9.42% year over year versus $8.643 billion in Q2 2025, and the trailing four-quarter total of roughly $34.9 billion (Q3 2025 $8.317B, Q4 2025 $8.536B, Q1 2026 $8.398B, Q2 2026 $9.457B) shows a clear upward inflection after a flat 2025. Segment data shows the mix: Engine at $3.084 billion, Distribution at $3.326 billion, Components at $2.891 billion, Power Systems at $2.255 billion, and Accelera at just $145 million, with $2.244 billion of intersegment eliminations — meaning the distribution and power systems businesses, tied to data-center backup power and aftermarket service, are the growth engines while Accelera remains immaterial to the top line. The 9.4% growth rate, if sustained, supports the consensus revenue estimate of $44.8 billion, implying continued mid-single-to-high-single-digit expansion.
Profitability is solid and improving: Q2 2026 net income was $932 million on a 9.86% net margin, with gross margin of 26.07% and operating margin of 13.52%, up from Q4 2025's depressed 22.86% gross margin and 7.50% operating margin, and roughly in line with Q2 2025's 26.39% gross margin. The quarterly progression — gross margin of 26.71% in Q1 2026, 26.07% in Q2 2026, versus 22.86% in Q4 2025 — shows margins recovering from a weak fourth quarter, and the 25.29% trailing gross margin and 11.95% operating margin are consistent with a capital-intensive industrial machinery business. Net income of $932 million on $9.457 billion of revenue, with EBITDA of $1.467 billion (15.5% EBITDA margin), confirms Cummins remains a profitable, cash-generative industrial even as it funds Accelera losses.
Balance sheet and cash flow are healthy: debt-to-equity of 0.657, current ratio of 1.76, and ROE of 23.0% (with ROA of 7.0%) indicate a leveraged but well-covered capital structure, while trailing free cash flow of $3.367 billion against a $70.4 billion market cap implies an FCF yield of roughly 4.8%. Q2 2026 operating cash flow of $1.499 billion and FCF of $1.25 billion (after $249 million of capex) comfortably covered $276 million of dividends and $225 million of buybacks, and cash stood at $3.179 billion at quarter-end. The 1.50% dividend yield with a 37.1% payout ratio leaves ample room for continued capital returns, and the interest coverage of roughly 16x (per historical ratios) confirms the debt load is manageable.
Quarterly Revenue
$9.5B
2026-06
Revenue YoY Growth
+9.4%
YoY Comparison
Gross Margin
26.1%
Latest Quarter
Free Cash Flow
$3.4B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is CMI Overvalued?
Because Cummins is solidly profitable (Q2 2026 net income of $932 million), the PE ratio is the appropriate primary metric: the trailing PE is 24.76x against a forward PE of 15.26x, a 38% compression that implies the market expects meaningful earnings growth — consistent with consensus EPS of $40.34 versus the trailing figure. The gap between trailing and forward multiples is unusually wide for an industrial, suggesting either a depressed trailing base (Q4 2025's weak $4.27 EPS) or genuine optimism about 2027 emissions-driven pricing and data-center power demand; the PEG ratio of -0.89 is not meaningful given the sign distortion and should be disregarded.
On peer comparison, Cummins trades at a PS ratio of 2.09x, EV/Sales of 2.27x, and EV/EBITDA of 14.02x, with a PB of 5.70x — the EV/EBITDA of 14x is roughly in line with large-cap industrial machinery peers (typically 12x-16x), while the 5.70x PB is elevated for a capital-intensive manufacturer and reflects the strong 23% ROE. The 25.3% gross margin and 8.4% net margin are typical-to-good for the machinery sector, so the valuation does not scream premium on an EV/EBITDA basis, but the 19.4x price-to-cash-flow and 2.09x PS suggest the market is paying up relative to the company's historical norms.
Historical context is telling: Cummins' PE ratio was 26.4x in Q2 2026, 28.4x in Q1 2026, and 29.7x in Q4 2025, versus 12.7x in Q2 2025 and 13.1x in Q1 2025 — meaning the current 24.76x trailing PE is near the top of its multi-year band, well above the ~12x-13x levels of a year ago. The PS ratio of 2.09x compares with 10.4x in Q2 2026 historical data (a different calculation basis) and 5.2x in Q2 2025, so the stock is not cheap on its own history; the market is pricing in optimistic expectations for power systems and the 2027 emissions cycle, leaving limited margin of safety if growth disappoints.
PE
24.8x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 5x~30x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
14.0x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on the gap between trailing and forward earnings. The trailing PE of 24.76x versus a forward PE of 15.26x implies the market expects EPS to jump to roughly $40.34 from a trailing base depressed by Q4 2025's weak $4.27 EPS; if that earnings inflection fails to materialize, the multiple would look stretched. Accelera, at just $145 million of revenue versus $9.457 billion total, remains a margin drag with no clear path to profitability, and the capital-intensive model (Q2 2026 capex of $249 million) means free cash flow of $3.367 billion must fund both growth and the 1.50% dividend (37.1% payout). Debt-to-equity of 0.657 and a current ratio of 1.76 are manageable, but interest coverage of roughly 16x leaves less cushion if EBITDA of $1.467 billion compresses in a downturn.
Market and competitive risks are significant given the valuation reset. The stock trades at 5.70x book and 2.09x sales, elevated for a machinery manufacturer, and its 24.76x trailing PE is near the top of its multi-year band versus ~13x a year ago, so any growth disappointment invites multiple compression. Beta of 1.238 means Cummins amplifies market moves by roughly 24%, and the 3-month relative strength of -20.76 versus SPY shows severe recent underperformance that could persist if industrial rotation continues. Competition is intensifying: recent news highlights Generac's $2.4 billion Amazon generator deal and $1.6 billion data-center backlog, directly threatening Cummins' Power Systems growth narrative in backup power. Tariff and 2027 emissions-regulatory uncertainty add further external risk.
In a worst-case scenario, a cyclical North American truck downturn coincides with power-systems order deceleration as competitors like Generac win hyperscale contracts, causing the forward EPS estimate of $40.34 to be cut toward the low end of $34.25. Combined with multiple compression from 15.26x toward the historical ~13x, the stock could retest its 52-week low of $405.82, a decline of roughly 24% from the current $531.33. A deeper break toward the analyst low target of $530 is already priced in, but a full re-rating to the 52-week low would represent a -24% downside, consistent with the 29% maximum drawdown already experienced.