Cummins
CMI
$554.76
-1.21%
Cummins Inc. is a global leader in the design and manufacture of diesel and natural gas engines, along with powertrain components, filtration, and power generation equipment, serving heavy- and medium-duty commercial trucks, off-highway equipment, and industrial markets. The company differentiates itself through its extensive distribution network of over 650 distributors and 19,000 dealer locations across 190 countries, and its unique business model that competes with many of its own OEM customers. Currently, the investor narrative centers on Cummins' strategic transition toward zero-emissions technologies, including its Accelera segment, and its ability to navigate cyclical end markets while capitalizing on growth opportunities in data center power demand and infrastructure spending. Recent financial results show modest revenue growth, but the stock has experienced significant volatility, reflecting broader market concerns about economic slowdown and the pace of the energy transition.…
CMI
Cummins
$554.76
Related headlines
Investment Opinion: Should I buy CMI Today?
Rating: Buy. Cummins offers a compelling risk/reward with a forward PE of 16.25x, well below the trailing 24.76x, and a consensus 'Buy' rating with an average target of $757.02, implying 35% upside. The thesis is that the market is undervaluing the company's earnings recovery potential, driven by cyclical tailwinds and data center power demand. Supporting evidence includes: (1) forward EPS estimate of $40.40 vs. trailing EPS of ~$22.65, (2) strong ROE of 23.02%, (3) free cash flow of $2.67 billion supporting dividends and buybacks, and (4) a diversified revenue base with 40% international exposure. The stock is trading at a 35% discount to the average analyst target, and even the low target of $530 is only 5.5% below the current price, limiting downside.
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CMI 12-Month Price Forecast
The AI model assesses Cummins as a bullish opportunity over the next 12 months, driven by a favorable forward valuation and strong analyst support. The key risk is that the expected earnings growth may not materialize if the cyclical downturn deepens, but the current price already reflects some pessimism. If revenue growth reaccelerates and margins hold, the stock could re-rate toward the average target. The stance would be upgraded to high confidence if Q2 earnings show accelerating growth, or downgraded to neutral if the stock breaks below $530.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Cummins's 12-month outlook, with a consensus price target around $757.02 and implied upside of +36.5% versus the current price.
Average Target
$757.02
0 analysts
Implied Upside
+36.5%
vs. current price
Analyst Count
—
covering this stock
Price Range
$530 - $894
Analyst target range
The target price range spans from a low of $530.00 to a high of $894.00, showing a wide spread of $364, which reflects significant uncertainty about the company's future performance. The high target of $894 implies a potential upside of +59.4%, likely assuming a successful transition to cleaner technologies and robust demand for power generation. The low target of $530 is just below the current price, suggesting a downside risk of -5.5%, which could materialize if cyclical downturns or regulatory pressures impact earnings. Recent ratings actions have been mostly positive, with upgrades from UBS (Neutral to Buy) and reaffirmations of Buy/Overweight from major firms like Citigroup, Morgan Stanley, and Barclays, indicating a supportive sentiment among institutional investors.
Bulls vs Bears: CMI Investment Factors
Cummins presents a classic cyclical value opportunity with strong analyst backing and a forward PE of 16.25x, but the stock is currently in a sharp correction, down 13.8% in the past month. The bull case rests on expected earnings growth of 52% and a 35% upside to the average target, while the bear case highlights decelerating revenue, high trailing valuation, and negative momentum. The most critical tension is whether the market's optimism about future earnings (implied by the low forward PE) is justified, given the cyclical slowdown and the uncertain pace of the energy transition. If revenue growth reaccelerates and margins hold, the stock could re-rate higher; if not, the current correction may deepen.
Bullish
- Strong Analyst Conviction with 35% Upside: The average analyst target price is $757.02, implying a 35.0% upside from the current price of $560.75. With 20 analysts covering and a consensus rating of 'Buy' (mean score 1.87), institutional sentiment remains strongly positive despite recent volatility.
- Forward PE Suggests Significant Earnings Growth: The trailing PE of 24.76x contrasts sharply with the forward PE of 16.25x, implying the market expects a 52% earnings increase over the next year. Analyst EPS estimates of $40.40 for the next fiscal year support this, driven by margin recovery and cyclical tailwinds.
- Robust Profitability and Cash Generation: Cummins maintains a net margin of 8.44% and an operating margin of 11.48%, with trailing free cash flow of $2.67 billion. The ROE stands at an impressive 23.02%, reflecting efficient capital deployment and a strong competitive moat in engine manufacturing.
- Diversified Revenue Streams and Global Reach: Revenue is well-diversified across Distribution ($3.12B), Engine ($2.67B), and other segments, with about 40% from international markets. This reduces dependence on any single market or product line, providing stability amid regional economic fluctuations.
Bearish
- Sharp Recent Decline and Negative Momentum: The stock has fallen 13.76% over the past month and 13.89% over the past three months, underperforming the S&P 500 by 13.81% and 18.32% respectively. This negative relative strength suggests waning investor confidence and potential further downside if the trend persists.
- Decelerating Revenue Growth: Q1 2026 revenue grew only 2.74% YoY to $8.398B, down from the 5.7% growth seen in Q2 2025. The sequential decline from Q2 2025's $8.643B indicates a slowdown in end-market demand, which could pressure earnings if not reversed.
- High Valuation Relative to Historical Norms: The trailing PE of 24.76x is elevated for a cyclical industrial, and the negative PEG ratio (-0.89) suggests the market expects earnings contraction, not growth. This leaves little room for error, and any miss could trigger multiple compression.
- Cyclicality and Regulatory Risks: Cummins is highly exposed to the cyclical heavy-duty truck market, which is sensitive to economic downturns. Additionally, tightening emissions regulations could increase R&D costs (currently $358M per quarter) and disrupt the transition to cleaner technologies.
CMI Technical Analysis
Cummins' stock has been in a strong uptrend over the past year, with a 1-year price change of +39.86%, significantly outperforming the S&P 500's +18.65% gain. However, the current price of $560.75 sits at only 42.6% of the 52-week range (between $390.11 low and $737.76 high), indicating a substantial pullback from the highs. This positioning suggests that while the long-term trend is bullish, the stock is currently in a corrective phase, potentially offering a value opportunity if the underlying fundamentals remain intact, but also posing a risk of further downside if the correction deepens.
Beta
1.23
1.23x market volatility
Max Drawdown
-25.0%
Largest decline past year
52-Week Range
$396-$738
Price range past year
Annual Return
+40.5%
Cumulative gain past year
| Period | CMI Return | S&P 500 |
|---|---|---|
| 1m | -12.6% | -1.4% |
| 3m | -15.4% | +3.3% |
| 6m | +3.6% | +15.1% |
| 1y | +40.5% | +17.2% |
| ytd | +6.3% | +11.8% |
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CMI Fundamental Analysis
Cummins' revenue trajectory has been modestly growing, with Q1 2026 revenue of $8.398 billion, up 2.74% year-over-year. However, this growth rate is decelerating compared to prior quarters, as Q2 2025 saw revenue of $8.643 billion, and Q4 2025 revenue was $8.536 billion. The company's revenue segments show a diversified mix, with Distribution ($3.116B) and Engine ($2.672B) being the largest contributors, while the Accelera segment, focused on zero-emissions, remains small at $101 million. The modest growth suggests a mature cyclical business, with potential for acceleration if infrastructure and data center demand picks up.
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?
Given Cummins' positive net income, the PE ratio is the primary valuation metric. The trailing PE is 24.76x, while the forward PE is 16.25x, indicating that the market expects significant earnings growth in the coming year. This gap implies a strong growth expectation, which is supported by analyst EPS estimates of $40.40 for the next fiscal year, up from the trailing EPS of approximately $22.65. The PEG ratio is negative (-0.89), which is unusual and suggests that the market is pricing in a decline in earnings growth, or that the metric is distorted by cyclicality.
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 risks include a debt-to-equity ratio of 0.66, which is manageable but not negligible, and interest expenses of $76 million per quarter that could rise if rates stay high. The company's net margin of 8.44% is solid, but operating margin dipped to 11.3% in Q1 2026 from 14.2% in Q2 2025, indicating cost pressures. Free cash flow of $2.67 billion provides a cushion, but the payout ratio of 37.1% and ongoing R&D spending ($358M quarterly) could strain cash if earnings decline. Revenue concentration in cyclical truck markets (Engine segment $2.67B) makes earnings volatile, as seen in the EPS swing from $6.46 in Q2 2025 to $4.73 in Q1 2026.