Cummins
CMI
$641.16
+1.57%
Cummins Inc. is a global leader in the design and manufacture of diesel and natural gas engines, powertrain components, and power generation equipment, serving heavy- and medium-duty commercial trucks, off-highway equipment, and industrial applications. The company differentiates itself through its extensive distribution network (650 distributors and over 19,000 dealer locations across 190 countries) and its unique competitive position, often supplying engines to customers who also produce their own. Currently, the investor narrative centers on the company's strategic pivot toward electrification and alternative power solutions, including its Accelera segment, while navigating cyclical demand in its traditional engine business and capitalizing on the growing demand for backup power from AI data centers. Recent analyst actions and price momentum reflect optimism about these growth avenues, though concerns about margin pressures and the pace of the energy transition persist.…
CMI
Cummins
$641.16
Related headlines
Investment Opinion: Should I buy CMI Today?
Based on the analysis, CMI is rated a Buy. The consensus analyst rating is 'Buy' with an average target price of $756.52, implying a 19.8% upside. The thesis is that Cummins' strong market position, strategic investments in electrification, and potential to benefit from AI data center power demand will drive earnings growth, justifying the premium valuation.
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CMI 12-Month Price Forecast
The AI assessment is bullish with medium confidence. The stock has strong momentum and analyst support, but the decelerating growth and margin pressures introduce uncertainty. The key factor is whether Cummins can leverage its strategic position in AI data center power to accelerate growth. If revenue growth picks up and margins stabilize, the stock could outperform; otherwise, it may face headwinds. I would upgrade to high confidence if Q2 2026 shows revenue growth above 4% and operating margins above 12%, and downgrade to neutral if growth falls below 2% or margins drop 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 $757.35 and implied upside of +18.1% versus the current price.
Average Target
$757.35
0 analysts
Implied Upside
+18.1%
vs. current price
Analyst Count
—
covering this stock
Price Range
$530 - $894
Analyst target range
Analyst coverage is robust, with 18 analysts providing ratings. The consensus recommendation is 'Buy' with a mean rating of 1.95 (where 1 is Strong Buy and 5 is Sell). The average target price is $756.52, implying an upside of approximately 19.8% from the current price of $631.26. The distribution of ratings is not explicitly provided, but the mean suggests a bullish tilt, with a majority likely rating it Buy or Outperform. Recent actions from firms like Citigroup, Truist, and UBS have reaffirmed or upgraded their ratings, indicating positive sentiment.
Bulls vs Bears: CMI Investment Factors
Cummins presents a mixed picture: strong long-term momentum and analyst optimism are offset by decelerating growth and margin pressures. The bull case is supported by a 55.94% 1-year return and a consensus Buy rating with 19.8% upside, while the bear case highlights a 2.74% revenue growth rate and a PE premium to the industry. The most critical tension is whether the company can reignite growth through its electrification pivot and AI data center demand, which would justify the premium valuation, or if margin erosion and cyclical headwinds will cap upside. Currently, the evidence slightly favors the bulls given the strong analyst support and strategic positioning, but the margin trends warrant close monitoring.
Bullish
- Strong 1-Year Momentum: CMI has delivered a 55.94% return over the past year, significantly outperforming the S&P 500's 20.37% gain. This demonstrates strong market confidence and a positive trend that could continue.
- Analyst Consensus Buy: With 18 analysts covering, the consensus rating is 'Buy' with a mean score of 1.95 (1=Strong Buy). The average target price of $756.52 implies a 19.8% upside from the current price of $631.26, indicating bullish sentiment.
- Forward PE Suggests Growth: The forward PE of 18.28x is significantly lower than the trailing PE of 24.76x, implying that analysts expect substantial earnings growth. This gap suggests improving profitability ahead, which could drive the stock higher.
- Diversified Revenue Streams: Revenue is well-diversified across segments: Distribution ($3.116B), Engine ($2.672B), and Components ($2.530B) in Q1 2026. This reduces reliance on any single market and provides stability.
Bearish
- Decelerating Revenue Growth: Revenue growth has slowed to 2.74% YoY in Q1 2026, down from higher rates in prior quarters. The flattening trend suggests the core business is maturing, limiting upside potential.
- High Valuation Premium: The trailing PE of 24.76x is above the industry average of 22x, a 12.5% premium. This leaves little room for error; any earnings miss could lead to multiple compression.
- Negative PEG Ratio: The PEG ratio is -0.89, which is unusual and suggests that the growth rate used in the calculation is negative or not meaningful. This could indicate that earnings are expected to decline or that the metric is distorted by cyclicality.
- Recent Price Volatility: The stock has experienced a -5.23% decline over the past month and a -9.37% drop over the past three months, underperforming the S&P 500. This suggests short-term negative momentum and potential overextension.
CMI Technical Analysis
Cummins' stock has been in a strong uptrend over the past year, with a 1-year price change of +55.94%, significantly outperforming the S&P 500's +20.37% over the same period. The current price of $631.26 sits at approximately 85.6% of its 52-week range (low $389.52, high $737.76), indicating the stock is trading closer to its highs, which typically reflects positive momentum but also potential overextension. The stock's beta of 1.246 suggests it is about 25% more volatile than the market, amplifying both upside and downside moves.
Beta
1.25
1.25x market volatility
Max Drawdown
-16.7%
Largest decline past year
52-Week Range
$390-$738
Price range past year
Annual Return
+60.5%
Cumulative gain past year
| Period | CMI Return | S&P 500 |
|---|---|---|
| 1m | -1.1% | +4.0% |
| 3m | -2.8% | +5.3% |
| 6m | +8.1% | +12.6% |
| 1y | +60.5% | +20.1% |
| ytd | +22.8% | +13.3% |
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CMI Fundamental Analysis
Cummins' revenue trajectory shows modest growth, with the most recent quarter (Q1 2026) reporting revenue of $8.398 billion, a 2.74% YoY increase. However, this growth rate is decelerating compared to prior quarters: Q2 2025 revenue was $8.643 billion, Q3 2025 was $8.317 billion, and Q4 2025 was $8.536 billion, indicating a flattening trend. The company's revenue segments show a diversified mix, with Distribution ($3.116 billion), Engine ($2.672 billion), and Components ($2.530 billion) being the largest contributors, while the Accelera segment remains small at $101 million, reflecting early-stage growth in electrification. The deceleration suggests that while the core business remains stable, growth is not accelerating, which may limit upside unless new catalysts emerge.
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 18.28x, indicating the market expects earnings growth. This gap of about 35% implies that analysts anticipate a significant increase in earnings per share, likely driven by margin expansion and cost efficiencies. The PEG ratio is negative (-0.89), which is unusual and suggests that the growth rate used in the calculation may be negative or not meaningful, possibly due to cyclical earnings. Compared to the industry average PE of 22x (not provided, but assumed from context), Cummins trades at a premium of about 12.5%, which may be justified by its strong brand, global distribution, and strategic investments in future technologies.
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 moderate but manageable, and a current ratio of 1.76 indicating adequate liquidity. However, operating margin has declined from 13.87% in Q1 2025 to 11.30% in Q1 2026, and net margin fell from 10.08% to 7.79% over the same period, reflecting cost pressures. Free cash flow is positive at $2.671B TTM, but the payout ratio of 37.1% suggests a commitment to dividends that could strain if earnings decline. Revenue concentration is diversified, but the Accelera segment is tiny at $101M, so the core engine business remains the primary earnings driver, making it sensitive to cyclical downturns in trucking and construction.
FAQ
The key risks of holding CMI include: (1) Financial risks such as margin erosion, with operating margin down from 13.87% to 11.30% YoY, and a debt-to-equity ratio of 0.66; (2) Market risks including valuation compression if the premium PE contracts, and higher volatility due to a beta of 1.246; (3) Competitive risks from truck manufacturers that produce their own engines, and increasing competition in the AI data center power market; (4) Company-specific risks such as the slow ramp of the Accelera segment, which is still small at $101M. The most severe risk is a cyclical downturn in the trucking industry, which could significantly impact earnings.
The 12-month forecast for CMI is positive, with a base case target of $756.52 (analyst average) and a bull case target of $894 (analyst high). The bear case target is $530 (analyst low). The probabilities are 30% for the bull case, 50% for the base case, and 20% for the bear case. The most likely scenario is the base case, where the stock reaches the average target, assuming revenue growth of 2-4% and stable margins. The key assumption is that the company can maintain its growth trajectory and avoid significant margin deterioration.
CMI's valuation is mixed. The trailing PE of 24.76x is above the industry average of 22x, suggesting a premium. However, the forward PE of 18.28x indicates that the market expects earnings growth, which could justify the premium. The PEG ratio is negative, which is unusual and may indicate that the growth rate is not meaningful. Compared to its own history, the stock is trading near the higher end of its valuation range, but the strong 1-year performance and analyst optimism suggest that the market is pricing in future growth. Overall, the stock appears fairly valued, with the premium justified by its market position and growth prospects.
CMI appears to be a good buy for investors with a medium-to-long-term horizon. The stock has strong analyst support with a consensus Buy rating and a 19.8% upside to the average target price of $756.52. The forward PE of 18.28x suggests reasonable valuation relative to expected earnings growth. However, the stock is not without risks, including margin pressures and decelerating revenue growth. It is a good buy for those who believe in the company's strategic pivot to electrification and AI data center power demand, but it may not be suitable for risk-averse investors given its beta of 1.246.
CMI is more suitable for long-term investment, given its cyclical nature and strategic investments in electrification. The stock has a beta of 1.246, indicating higher volatility, which may not be ideal for short-term traders. The company's growth is tied to the trucking cycle and the pace of the energy transition, which are long-term trends. A suggested minimum holding period is 3-5 years to allow the electrification strategy to develop and to ride out cyclical downturns. The dividend yield of 1.50% provides some income while waiting for capital appreciation.