Cummins
CMI
$517.00
+0.08%
Cummins Inc. designs, manufactures, and distributes diesel and alternative-fuel engines, powertrain components, filtration and aftertreatment systems, and power generation equipment for heavy- and medium-duty trucks, off-highway equipment, locomotives, and standby/prime power applications, operating across Engine, Components, Distribution, Power Systems, and Accelera segments. As one of the world's largest independent engine makers, Cummins occupies a distinctive competitive position: it supplies many of the same heavy-duty truck OEMs that build competing in-house engines, giving it deep integration with customers while exposing it to insourcing risk, and it operates a vast global service network of roughly 650 distributors and over 19,000 dealer locations across 190 countries. The current investor narrative centers on the durability of the North American truck cycle and aftermarket demand against a backdrop of soft global industrial activity, with the market debating whether the company's power generation and data-center-adjacent opportunities can offset cyclical weakness in truck and off-highway volumes. Recent news flow has highlighted the broader AI/data-center power theme — including Generac's $2.4 billion Amazon generator deal — which has raised investor interest in Cummins' Power Systems franchise as a potential beneficiary of backup-power demand, even as the stock has de-rated sharply from its 2026 highs on growth and margin concerns.…
CMI
Cummins
$517.00
Related headlines
Investment Opinion: Should I buy CMI Today?
The synthesized recommendation is Hold with a bias toward accumulation on weakness. The analyst consensus is Buy (mean rating 1.87) with an average target of $745.96, implying 42% upside, but the stock is in a clear downtrend with deteriorating fundamentals — revenue growth of just 2.74% and operating margin compression to 11.30% — creating a tension between valuation and momentum that argues for patience rather than aggressive buying.
The supporting evidence is mixed but leans positive on valuation. The forward PE of 15.16x is undemanding for a company with a 23.02% ROE and 25.29% gross margin, and the PS ratio of 2.09x is low for a large-cap industrial. Free cash flow TTM is $2.671 billion, supporting a 1.50% dividend yield with a conservative 37.11% payout ratio. The 42% upside to the average analyst target is unusually large, and the low target of $530 is essentially at the current price, suggesting the bear case is fully discounted. However, the 23.45% three-month decline and 29-point relative weakness versus SPY indicate institutional selling that may not be exhausted.
The biggest risks that could invalidate the thesis are: (1) further earnings estimate cuts if truck and off-highway demand weakens more than expected, (2) failure to capture data-center power demand as competition intensifies, and (3) a breakdown below the $521-$525 support zone that opens the path to the $400s. The rating would upgrade to Buy if the stock stabilizes above $560-$580 and forward estimates hold, or downgrade to Sell if revenue growth turns negative or operating margins fall below 10%. On balance, the stock appears undervalued relative to its history and peers, but the cyclical risk and negative momentum warrant a Hold rating until evidence of stabilization emerges.
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CMI 12-Month Price Forecast
Cummins presents a classic value-versus-momentum dilemma. The valuation is undemanding — forward PE of 15.16x, PS of 2.09x, and a 42% upside to the average analyst target — but the fundamental trend is deteriorating, with revenue growth at 2.74% and operating margins down 257 basis points year over year. The stock's 23.45% three-month decline and 29-point relative weakness versus SPY suggest institutional selling that may not be complete, while the 3.57 short ratio creates squeeze potential on any positive catalyst. The key question is whether the Power Systems and data-center opportunity can offset cyclical weakness in truck and off-highway; evidence from the Generac-Amazon deal is encouraging but not yet reflected in Cummins' numbers. I would upgrade to bullish if the stock stabilizes above $560-$580 and forward estimates hold, or downgrade to bearish if revenue growth turns negative or operating margins fall below 10%.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Cummins's 12-month outlook, with a consensus price target around $741.26 and implied upside of +43.4% versus the current price.
Average Target
$741.26
0 analysts
Implied Upside
+43.4%
vs. current price
Analyst Count
—
covering this stock
Price Range
$530 - $894
Analyst target range
Coverage is robust, with 20 analysts following Cummins and a consensus recommendation of Buy (recommendation mean of 1.87 on a 1-5 scale where 1 is Strong Buy). The average target price is $745.96, which implies roughly 42% upside from the current price of $525.06 — an unusually large gap that reflects how far the stock has fallen below where the sell side believes fair value lies. The consensus is clearly bullish, and the institutional ratings list shows a constructive tone: UBS upgraded to Buy from Neutral on June 8, 2026, and the most recent actions from Citigroup (Buy, July 14), Truist (Buy, July 2), and Wells Fargo (Overweight, June 17) were all reiterations of positive ratings, with no downgrades in the visible record. The target range is wide, spanning $530 at the low to $894 at the high, a spread of $364, or roughly 69% of the current share price. The low target of $530 — essentially at the current price — implies the bear case is already fully discounted and prices in flat-to-down earnings, margin compression, and continued cyclical weakness in truck and off-highway demand. The high target of $894 assumes a sharp recovery: multiple expansion back toward prior-cycle levels, accelerating Power Systems and data-center-related demand, and successful execution on the Accelera transition. The wide spread signals genuine disagreement about the depth and duration of the current downturn, and with the stock down 23.45% over three months while analysts maintain Buy ratings, the setup suggests either a significant value opportunity or a sell-side that has been slow to mark down estimates — a tension investors should monitor closely through the next earnings cycle.
Bulls vs Bears: CMI Investment Factors
The bear case currently has stronger near-term evidence: revenue growth has decelerated to 2.74%, operating margins have compressed 257 basis points year over year, and the stock is in a clear downtrend with 29 points of relative weakness versus SPY over three months. However, the bull case rests on a compelling valuation disconnect — the forward PE of 15.16x and the 42% upside to the average analyst target of $745.96 suggest the market has priced in a severe cyclical downturn that may not materialize. The single most important tension is whether the Power Systems and data-center power opportunity can offset cyclical weakness in truck and off-highway volumes; if it can, the stock is deeply undervalued, but if not, earnings estimates face further downward revisions. The wide analyst target range of $530 to $894 (a $364 spread) reflects genuine disagreement about the depth and duration of this downturn.
Bullish
- Deep analyst discount to fair value: The consensus average target price of $745.96 implies 42% upside from the current $525.06, with 20 analysts maintaining a Buy consensus (mean rating 1.87). The low target of $530 is essentially at the current price, suggesting the bear case is already fully discounted.
- Forward PE at 15.16x is undemanding: The forward PE of 15.16x sits near the low end of Cummins' historical earnings multiple range, while trailing PE is 24.76x. This 39% trailing-to-forward discount implies the market expects meaningful EPS growth toward the consensus $40.37 estimate.
- Power Systems data-center optionality: Cummins' Power Systems segment generated $1.956 billion in Q1 2026 revenue, and the Generac-Amazon $2.4 billion generator deal validates the data-center backup power theme. Cummins' 650 distributors and 19,000 dealer locations position it to capture similar demand.
- Strong balance sheet and cash returns: Debt-to-equity is a conservative 0.657, current ratio is 1.76, and ROE is 23.02%. The company returned $276 million in dividends and $243 million in buybacks in Q1 2026 while holding $2.614 billion in cash, with a 37.11% payout ratio leaving ample room for continued distributions.
Bearish
- Revenue growth has stalled: Q1 2026 revenue of $8.398 billion grew just 2.74% year over year, a sharp deceleration from prior cycles. Sequential revenue has been range-bound between $8.317 billion and $8.643 billion over the past four quarters, with no clear directional trend.
- Operating margin compression is accelerating: Q1 2026 operating income fell to $949 million (11.30% margin) from $1.134 billion (13.87%) a year earlier, while SG&A rose to $845 million from $754 million. Net income dropped to $654 million (7.79% margin) from $824 million (10.08%), despite gross margin improving to 26.71%.
- Severe relative underperformance and downtrend: The stock is down 23.45% over three months versus SPY's +5.81%, a 29-point relative weakness, and down 9.18% over one month. The 28.38% maximum drawdown from the 52-week high of $737.76 confirms institutional distribution.
- Cyclical exposure to truck and off-highway: Cummins competes with many of its heavy-duty truck OEM customers that build in-house engines, creating insourcing risk. Soft global industrial activity and a potentially peaking North American truck cycle threaten the Engine and Components segments, which together contributed $5.2 billion in Q1 2026 revenue.
CMI Technical Analysis
Cummins is in a clear intermediate-term downtrend within a longer-term recovery structure. The stock is up 26.81% over the past year, but the current price of $525.06 sits at just 40.7% of its 52-week range (52-week low of $400.72, high of $737.76), meaning it has surrendered the majority of its 2026 gains and is trading far closer to the annual low than the high. That positioning signals a market that has shifted from momentum-driven accumulation to distribution, and the 28.38% maximum drawdown confirms the severity of the pullback from the peak. The 1-year gain is now largely a residual of the first-half rally rather than evidence of current strength. Recent momentum is decisively negative and diverging from the 1-year trend. The stock is down 9.18% over the past month and 23.45% over three months, versus a 1-year gain of 26.81% — a classic deceleration pattern in which the trailing return masks a deteriorating tape. Relative strength confirms the underperformance: -9.87% versus SPY over 1 month and -29.26% over 3 months, with the 6-month change of just +0.35% showing all of the past year's gains were front-loaded. The 3-month decline of 23.45% against SPY's +5.81% represents roughly 29 points of relative weakness, indicating institutional selling rather than broad-market beta. Key levels are well defined. Support sits at the 52-week low of $400.72, roughly 24% below the current price, while resistance is the 52-week high of $737.76, about 40% above. A breakdown below the recent $521-$525 area would open the path toward the $400s, while reclaiming the $560-$580 zone would be the first sign of stabilization. With a beta of 1.226, Cummins is about 23% more volatile than the market, and the 3.57 short ratio indicates short sellers have built a meaningful position — amplifying downside risk if support fails but also creating squeeze potential on any positive catalyst.
Beta
1.23
1.23x market volatility
Max Drawdown
-29.0%
Largest decline past year
52-Week Range
$401-$738
Price range past year
Annual Return
+21.7%
Cumulative gain past year
| Period | CMI Return | S&P 500 |
|---|---|---|
| 1m | -6.2% | +0.3% |
| 3m | -21.9% | +2.6% |
| 6m | -5.9% | +16.5% |
| 1y | +21.7% | +14.3% |
| ytd | -1.0% | +12.0% |
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CMI Fundamental Analysis
Cummins' revenue trajectory has flattened after a period of growth. Q1 2026 revenue was $8.398 billion, up just 2.74% year over year from $8.174 billion in Q1 2025, a sharp deceleration from the double-digit growth of prior cycles. Sequentially, revenue has been essentially range-bound: $8.536 billion in Q4 2025, $8.317 billion in Q3 2025, and $8.643 billion in Q2 2025, with no clear directional trend. Segment data shows the mix: Distribution at $3.116 billion and Engine at $2.672 billion are the largest contributors, followed by Components at $2.53 billion and Power Systems at $1.956 billion, while Accelera — the zero-emissions unit — remains immaterial at $101 million. The flat top line implies the investment case now rests on margin and capital returns rather than growth. Profitability remains solid but is compressing at the operating line. Q1 2026 net income was $654 million on a 7.79% net margin, down from $824 million and a 10.08% net margin in Q1 2025, even though gross margin improved to 26.71% from 26.36%. The pressure is below the gross line: operating income fell to $949 million (11.30% operating margin) from $1.134 billion (13.87%) a year earlier, and SG&A rose to $845 million from $754 million. The Q4 2025 quarter was the weakest recent print, with net income of $593 million and a 6.95% net margin on a 22.86% gross margin, showing meaningful quarter-to-quarter volatility. At a 25.29% gross margin and 11.48% operating margin, Cummins remains a mid-teens-margin industrial, but the trend is toward the lower end of its recent band. The balance sheet is healthy and cash generation is adequate, though working capital is a swing factor. Debt-to-equity is a conservative 0.657, the current ratio is 1.76, and ROE is a strong 23.02% (though ROA is only 7.00%, reflecting the capital-intensive asset base). Free cash flow on a trailing-twelve-month basis is $2.671 billion, but quarterly FCF is lumpy: $120 million in Q1 2026, $990 million in Q4 2025, and $1.007 billion in Q3 2025, with Q1 2026 operating cash flow of just $309 million dragged down by a $561 million working capital outflow. The company returned cash aggressively in Q1 2026 — $276 million in dividends and $243 million in buybacks — while holding $2.614 billion in cash, and the 1.50% dividend yield with a 37.11% payout ratio leaves ample room for continued distributions.
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 — Q1 2026 net income of $654 million and positive trailing earnings — the PE ratio is the appropriate primary metric. The stock trades at a trailing PE of 24.76x and a forward PE of 15.16x, a roughly 39% discount from trailing to forward that implies the market expects meaningful earnings growth (consensus 2026 EPS of $40.37 versus the current run-rate). The PEG ratio of -0.89 is distorted by a negative growth input and should be disregarded; the more useful signal is the forward PE of 15.16x, which is undemanding in absolute terms for a company with a 23.02% ROE. Relative to the broader industrial machinery sector, Cummins screens as a modest value. Its PS ratio of 2.09x and EV/Sales of 2.22x are low for a large-cap industrial with a 25.29% gross margin, while the EV/EBITDA of 14.02x is roughly in line with quality industrial peers. The PB ratio of 5.70x looks elevated, but that reflects the company's high ROE and relatively lean equity base rather than an overvaluation signal. On balance, the forward earnings multiple and sales multiples suggest the stock is trading at a discount to where its profitability and market position would justify, which is consistent with the market pricing in cyclical risk. Historically, Cummins' valuation has been volatile. Its PE ratio ranged from roughly 5.2x in Q1 2024 (a period distorted by a one-time gain) to 29.7x in Q4 2025, and its PS ratio ranged from about 3.8x to 8.9x over the same span. The current trailing PE of 24.76x sits in the upper-middle of that band, while the PS of 2.09x is well below the historical range — a discrepancy explained by the fact that the historical PS figures were computed on a different share-count basis. The forward PE of 15.16x is near the lower end of the historical earnings multiple range, suggesting the market is pricing in either earnings normalization or cyclical deterioration rather than optimistic growth, leaving room for re-rating if results stabilize.
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
Cummins faces meaningful financial and operational risks. Revenue growth has stalled at 2.74% year over year in Q1 2026, and operating margin compressed to 11.30% from 13.87% a year earlier, with SG&A rising to $845 million from $754 million. Net income fell to $654 million (7.79% margin) from $824 million (10.08%), and quarterly free cash flow is lumpy — Q1 2026 FCF was just $120 million, dragged by a $561 million working capital outflow. While debt-to-equity of 0.657 and a current ratio of 1.76 are healthy, the company's capital-intensive asset base (ROA of only 7.00%) and cyclical end markets mean earnings volatility is likely to persist.
Market and competitive risks are significant. The stock trades at a trailing PE of 24.76x, in the upper-middle of its historical range, leaving room for multiple compression if earnings disappoint. With a beta of 1.226, Cummins is 23% more volatile than the market, and the 3.57 short ratio amplifies downside if support at $521-$525 fails. The company competes with many of its heavy-duty truck OEM customers that build in-house engines, creating insourcing risk, and soft global industrial activity threatens the Engine and Components segments. Recent news highlighting Generac's $2.4 billion Amazon generator deal validates the data-center power theme but also signals rising competition in a market Cummins hopes to capture.
The worst-case scenario would be a synchronized global industrial recession combined with accelerating truck-cycle weakness and margin deterioration. In this scenario, the stock could retest its 52-week low of $400.72, representing a 23.7% decline from the current $525.06. If analyst estimates are revised down toward the low EPS estimate of $30.41, the forward PE would rise to 17.3x even at the current price, implying further downside. A more severe outcome — a breakdown below $400 — would require a recession deeper than currently priced, potentially driven by a sharp decline in North American truck production and failure to monetize the Power Systems opportunity.
FAQ
The most severe risk is cyclical: revenue growth has decelerated to 2.74% year over year, and a global industrial recession could turn growth negative, pushing the stock toward its 52-week low of $400.72. Second, margin compression is accelerating — operating margin fell to 11.30% from 13.87% a year earlier, and if it falls below 10%, earnings estimates would be cut sharply. Third, competitive risk: Cummins competes with many of its heavy-duty truck OEM customers that build in-house engines, creating insourcing risk, and rising competition in data-center power could limit its ability to capture that growth theme. Fourth, valuation risk: the trailing PE of 24.76x is in the upper-middle of its historical range, and with a beta of 1.226, the stock is 23% more volatile than the market, amplifying downside if support at $521-$525 fails.
The 12-month forecast has three scenarios: a base case (50% probability) targeting $600-$700, assuming revenue growth stabilizes at 2-4% and operating margins hold near 11-12%; a bull case (25% probability) targeting $745-$894, driven by a truck-cycle recovery and accelerating data-center power demand; and a bear case (25% probability) targeting $400-$530, assuming a global industrial recession and margin deterioration below 10%. The base case is most likely, with the key assumption being that Power Systems growth partially offsets truck weakness without a full cyclical recovery. The average analyst target of $745.96 aligns with the bull case, while the low target of $530 aligns with the upper end of the bear case.
CMI appears undervalued on forward earnings and sales multiples. The forward PE of 15.16x is near the low end of its historical range, while the PS ratio of 2.09x and EV/Sales of 2.22x are low for a large-cap industrial with a 25.29% gross margin. The trailing PE of 24.76x is in the upper-middle of its historical band, but the 39% discount from trailing to forward PE implies the market expects meaningful EPS growth toward the consensus $40.37. The EV/EBITDA of 14.02x is roughly in line with quality industrial peers. The market appears to be pricing in cyclical deterioration rather than optimistic growth, leaving room for re-rating if results stabilize. On balance, the stock trades at a discount to where its profitability and market position would justify.
From a risk/reward perspective, CMI offers a favorable asymmetry for patient investors: the average analyst target of $745.96 implies 42% upside, while the 52-week low of $400.72 represents 23.7% downside from the current $525.06. The forward PE of 15.16x is undemanding for a company with a 23.02% ROE and 25.29% gross margin, and the low analyst target of $530 is essentially at the current price, suggesting the bear case is fully discounted. However, the stock is in a clear downtrend with 23.45% three-month underperformance versus SPY, and operating margins have compressed to 11.30% from 13.87%. It is a good buy for value-oriented investors with a 12- to 18-month horizon who can tolerate volatility, but not for those seeking near-term momentum or income (1.50% yield).
CMI is better suited for long-term investment with a minimum holding period of 12 to 18 months. The stock is in a cyclical downturn with negative momentum — down 23.45% over three months and 9.18% over one month — making short-term trading risky despite the 3.57 short ratio offering squeeze potential. The dividend yield of 1.50% with a 37.11% payout ratio provides modest income but is not a primary reason to hold. Earnings visibility is limited by the cyclical truck and off-highway markets, and the beta of 1.226 means the stock will remain volatile. Long-term investors can look through the cycle to the 42% upside to the average analyst target, but they must be prepared for further downside toward the 52-week low of $400.72 if the industrial environment deteriorates.