Cummins
CMI
$664.65
-0.06%
Cummins Inc. is a global leader in the design and manufacture of diesel and natural gas engines, powertrain components, and power generation systems for commercial trucks, off-highway equipment, and industrial applications. The company's unique competitive position lies in its extensive distribution network spanning 190 countries and its ability to supply both original equipment manufacturers and end-users, often competing with its own customers who produce engines in-house. The current investor narrative centers on Cummins' ability to navigate cyclical demand in its core engine and components segments while capitalizing on growth opportunities in data center power backup and the emerging Accelera zero-emissions business, with recent analyst upgrades reflecting optimism around margin expansion and the company's role in powering AI infrastructure.…
CMI
Cummins
$664.65
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 $754.86 and implied upside of +13.6% versus the current price.
Average Target
$754.86
0 analysts
Implied Upside
+13.6%
vs. current price
Analyst Count
—
covering this stock
Price Range
$520 - $901
Analyst target range
Cummins is covered by 19 analysts, with a consensus recommendation of 'Buy' (mean rating 1.95 on a 1-5 scale where 1 is Strong Buy). The average price target is $754.39, implying 16.3% upside from the current price of $648.48. The distribution leans bullish, with recent upgrades from UBS (Neutral to Buy) and maintained Buy ratings from Citigroup, Truist, and Argus. Only JP Morgan holds a Neutral stance, suggesting broad institutional confidence.
The target range spans from $520.00 (low) to $901.00 (high), a wide spread of $381 that indicates significant uncertainty about the company's future. The high target of $901 assumes successful execution in data center power and Accelera, driving multiple expansion and earnings growth. The low target of $520 prices in cyclical downturn risks and potential margin compression. Recent institutional actions show no downgrades, with firms like Wells Fargo and Barclays maintaining Overweight ratings, reinforcing the positive sentiment. The wide range suggests investors should focus on the company's ability to execute on growth initiatives to realize the upside.
Bulls vs Bears: CMI Investment Factors
Cummins presents a balanced risk/reward profile. On the bull side, strong free cash flow, high ROE, and exposure to data center power demand support the investment case, with analysts seeing 16.3% upside to the average target. On the bear side, the stock trades at a premium valuation (24.8x P/E vs. sector 20x), faces cyclical revenue headwinds, and margin compression is a concern. The single most important tension is whether Cummins can sustain margin improvement and capitalize on data center growth to justify its premium multiple. Currently, the bull case has slightly stronger evidence given the company's financial strength and analyst upgrades, but the valuation leaves little room for error.
Bullish
- Strong Data Center Power Demand: Cummins is well-positioned to supply backup power for AI data centers, a rapidly growing market. Recent analyst upgrades from UBS and maintained Buy ratings from Citigroup and Truist reflect optimism around this catalyst, with the average analyst target of $754.39 implying 16.3% upside.
- Robust Free Cash Flow Generation: Trailing twelve-month free cash flow of $2.671 billion provides substantial financial flexibility for dividends, buybacks, and investment in growth initiatives like Accelera. The payout ratio of 37.1% leaves room for dividend increases.
- Impressive Profitability Metrics: ROE of 23.0% significantly exceeds the industrial sector average of ~15%, indicating efficient capital use. Gross margin improved to 26.7% in Q1 2026 from 22.9% in Q4 2025, showing margin recovery.
- Healthy Balance Sheet: Debt-to-equity of 0.66 and current ratio of 1.76 indicate low financial risk and ample liquidity. This provides a cushion during cyclical downturns and supports continued investment in growth.
Bearish
- Elevated Valuation vs. Peers: Trailing P/E of 24.8x is a 24% premium to the industrial sector average of ~20x. EV/EBITDA of 14.0x also exceeds the sector median of ~12x, leaving limited margin of safety if growth disappoints.
- Cyclical Revenue Exposure: Revenue growth decelerated to 2.7% YoY in Q1 2026 from 5.7% in Q2 2025, and the business is tied to commercial truck and off-highway cycles. A macroeconomic downturn could pressure earnings significantly.
- Margin Compression Risk: Operating margin fell to 11.3% in Q1 2026 from 13.9% in Q2 2025, and net margin declined to 7.8% from 10.3% in the same period. Rising costs or competitive pricing could further squeeze margins.
- Accelera Business Still Nascent: The zero-emissions Accelera segment generated only $101 million in Q1 2026, a fraction of total revenue. It remains unprofitable and faces execution risks, with no near-term material contribution expected.
CMI Technical Analysis
Cummins is in a sustained uptrend, with the stock up 86.3% over the past year, significantly outperforming the S&P 500's 18.4% gain. The current price of $648.48 sits at 78.6% of its 52-week range ($344.02 to $737.76), indicating the stock is still in the upper half of its range but has pulled back from the highs. This positioning suggests the market remains bullish but is digesting recent gains, with potential for further upside if momentum reaccelerates.
Short-term momentum has diverged from the longer-term trend: the stock is down 9.7% over the past month while up 3.4% over the past three months and 86.3% over the past year. This 1-month pullback contrasts with the strong 1-year uptrend, signaling a temporary correction rather than a trend reversal, as the 3-month change remains positive. The relative strength versus the S&P 500 is negative over 1 month (-10.0%) but strongly positive over 1 year (+67.9%), confirming the long-term outperformance is intact.
The 52-week high of $737.76 acts as key resistance, while the 52-week low of $344.02 provides major support. A breakout above $737.76 would signal a resumption of the uptrend and could target new highs, while a breakdown below the recent low near $511.70 (March 2026) would suggest a deeper correction. With a beta of 1.22, Cummins is 22% more volatile than the market, meaning it amplifies market moves—a factor to consider for risk management.
Beta
1.22
1.22x market volatility
Max Drawdown
-15.5%
Largest decline past year
52-Week Range
$355-$738
Price range past year
Annual Return
+82.0%
Cumulative gain past year
| Period | CMI Return | S&P 500 |
|---|---|---|
| 1m | -4.3% | +0.8% |
| 3m | +0.6% | +3.5% |
| 6m | +16.2% | +7.2% |
| 1y | +82.0% | +16.5% |
| ytd | +27.3% | +8.4% |
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CMI Fundamental Analysis
Cummins' revenue trajectory shows modest growth, with Q1 2026 revenue of $8.398 billion up 2.7% year-over-year, though this decelerates from the 5.7% growth in Q2 2025. Revenue has been relatively stable around $8.4-8.6 billion over the past four quarters, indicating a mature cyclical business. Segment performance reveals strength in Distribution ($3.116B) and Engine ($2.672B), while the Accelera zero-emissions segment remains small at $101 million, highlighting the early stage of the company's green transition.
The company is profitable with Q1 2026 net income of $654 million and a gross margin of 26.7%, which improved from 22.9% in Q4 2025 but remains below the 26.4% seen in Q1 2025. Operating margin of 11.3% in Q1 2026 is healthy but down from 13.9% in Q2 2025, suggesting some margin compression. The net margin of 7.8% is solid for an industrial company, though it has fluctuated between 6.4% and 10.3% over the past year.
Cummins maintains a strong balance sheet with a debt-to-equity ratio of 0.66 and a current ratio of 1.76, indicating ample liquidity. Free cash flow over the trailing twelve months is $2.671 billion, providing substantial cash generation to fund dividends and capital expenditures. The ROE of 23.0% is impressive, reflecting efficient use of equity, while the payout ratio of 37.1% leaves room for dividend growth or reinvestment.
Quarterly Revenue
$8.4B
2026-03
Revenue YoY Growth
+2.7%
YoY Comparison
Gross Margin
26.7%
Latest Quarter
Free Cash Flow
$2.7B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is CMI Overvalued?
Since Cummins has positive net income, the trailing P/E ratio of 24.8x is the primary valuation metric. The forward P/E of 19.0x implies that earnings are expected to grow, with the gap between trailing and forward suggesting the market anticipates a 23% earnings increase over the next year. This is consistent with analyst EPS estimates of $39.83 for the current fiscal year, up from the trailing twelve months' EPS of approximately $26.20.
Compared to the industrial machinery sector, Cummins trades at a premium. The trailing P/E of 24.8x is above the sector average of roughly 20x, representing a 24% premium. However, this premium may be justified by Cummins' superior profitability (ROE of 23% vs. sector average near 15%) and strong free cash flow generation. The EV/EBITDA of 14.0x is also above the sector median of ~12x, reflecting the market's willingness to pay for quality.
Historically, Cummins' current P/E of 24.8x is near the upper end of its five-year range, which has fluctuated between 10x and 30x. The stock has traded at elevated multiples during periods of strong earnings growth, such as in 2021-2022. The current level suggests the market is pricing in optimistic expectations for future earnings, supported by the analyst consensus for continued growth. A P/E near historical highs implies limited margin of safety if growth disappoints.
PE
24.8x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 5x~27x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
14.0x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: Cummins' debt-to-equity of 0.66 is manageable, but the company's cyclical revenue base poses risk. Revenue growth slowed to 2.7% YoY in Q1 2026, and operating margin contracted from 13.9% in Q2 2025 to 11.3% in Q1 2026. Free cash flow of $2.671 billion is strong, but if margins continue to compress, cash generation could weaken. The Accelera segment remains negligible at $101 million in revenue, with no near-term profitability, representing a drag on overall margins if investment continues.
Market & Competitive Risks: The stock's beta of 1.22 implies 22% higher volatility than the market, making it sensitive to macro shocks. The trailing P/E of 24.8x is above the sector average, creating valuation compression risk if earnings disappoint. Competition from engine manufacturers and the shift to electric vehicles could erode Cummins' market share in its core diesel engine business. Recent news about Generac's AI power pivot highlights competitive threats in the data center backup power market.
Worst-Case Scenario: A severe cyclical downturn combined with margin compression and failure to gain traction in data center or Accelera could drive the stock to the analyst low target of $520, representing a 19.8% decline from the current price of $648.48. The 52-week low of $344.02 would imply a 46.9% loss, but that level was reached under different market conditions. A more realistic worst case is a 20-25% decline to $520-485, consistent with historical drawdowns and the low analyst target.