Cummins
CMI
$517.32
-3.36%
Cummins Inc. is a global manufacturer of diesel and alternative-fuel engines, power generation systems, and powertrain components — including filtration, turbochargers, aftertreatment, and fuel systems — serving heavy- and medium-duty truck, off-highway, locomotive, and standby/prime power markets, with roughly 60% of sales in the US and Canada and 40% internationally, much of it through joint ventures in China and India. The company is a dominant, vertically integrated industrial platform whose unique competitive identity is that it supplies engines and components to many of the same heavy-duty truck OEMs it competes against, supported by an unmatched 650 distributors and 19,000-plus dealer locations across 190 countries. The current investor narrative is a tug-of-war between a cyclical North American truck downcycle and the emerging AI/data-center power opportunity: the Generac-Amazon $2.4 billion generator deal (September 2026) has refocused the market on data-center backup power demand, a theme directly relevant to Cummins' Power Systems segment, while the stock's 20% three-month decline reflects fears of slowing engine and components demand. Debate now centers on whether Cummins' Power Systems and Distribution businesses can offset weakness in the core Engine segment and whether the company can defend margins as it invests in Accelera's zero-emission platform amid an uncertain industrial capex backdrop.…
CMI
Cummins
$517.32
Related headlines
Investment Opinion: Should I buy CMI Today?
We rate CMI a Hold. The stock offers a balanced risk/reward: 20 analysts rate it a Buy with an average target of $741.26 (40.3% upside), but near-term momentum is negative (-20.16% over three months) and the core truck cycle remains weak. The thesis is that Power Systems and Distribution growth will eventually offset Engine segment weakness, but timing is uncertain.
Supporting evidence includes: (1) forward PE of 15.28x is attractive versus trailing 24.76x, implying expected EPS growth to $40.28; (2) Q2 2026 revenue grew 9.42% YoY to $9.457 billion, with net income of $932 million (9.85% margin); (3) TTM free cash flow of $3.367 billion supports the 1.50% dividend yield and 37.1% payout ratio; (4) ROE of 23.0% and ROA of 7.0% demonstrate efficient operations. However, gross margin compression to 26.07% and operating margin decline to 13.52% are concerns.
Key risks that could invalidate the thesis include a deeper truck downcycle, failure to capitalize on data-center power demand, and margin erosion from Accelera investments. The rating would upgrade to Buy if the stock stabilizes above $550 and Power Systems bookings accelerate, or downgrade to Sell if revenue growth turns negative and forward PE falls below 12x. At 15.28x forward earnings, CMI is fairly valued relative to its history and peers, with the market pricing in modest growth.
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CMI 12-Month Price Forecast
Cummins presents a balanced risk/reward with a neutral stance. The company's strong cash flow, reasonable forward valuation, and exposure to the growing data-center power market are offset by cyclical truck headwinds, margin pressure, and negative price momentum. The analyst consensus is bullish, but the market is pricing in near-term uncertainty. We would upgrade to bullish if Power Systems bookings accelerate and margins stabilize, or downgrade to bearish if truck demand deteriorates further and free cash flow declines.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Cummins's 12-month outlook, with a consensus price target around $743.08 and implied upside of +43.6% versus the current price.
Average Target
$743.08
0 analysts
Implied Upside
+43.6%
vs. current price
Analyst Count
—
covering this stock
Price Range
$530 - $890
Analyst target range
Bulls vs Bears: CMI Investment Factors
The bear case currently has stronger near-term evidence, given CMI's 20.16% three-month decline, negative relative strength of -23.50%, and margin compression. However, the bull case rests on a powerful data-center power catalyst and a 40.3% analyst target upside that could materialize if Power Systems offsets truck weakness. The single most important tension is whether Cummins' Power Systems and Distribution segments can grow fast enough to offset a cyclical downturn in the core Engine segment. Resolution of this debate—likely revealed in upcoming quarterly results—will determine whether the stock re-rates toward analyst targets or tests its 52-week low.
Bullish
- Analyst consensus sees 40% upside: 20 analysts rate CMI a Buy with an average target price of $741.26, implying 40.3% upside from the current $528.32. The high target of $894 suggests even greater potential if data-center power demand accelerates.
- Power Systems data-center catalyst: The Generac-Amazon $2.4 billion generator deal validates the data-center backup power opportunity, directly relevant to Cummins' Power Systems segment. Cummins is a dominant incumbent in prime and standby power, and could capture significant share of this growing market.
- Strong profitability and cash generation: Q2 2026 net income was $932 million on $9.457 billion revenue (9.85% net margin), with TTM free cash flow of $3.367 billion. ROE of 23.0% and operating margin of 11.5% demonstrate efficient capital deployment.
- Revenue growth resumed in Q2 2026: Q2 2026 revenue grew 9.42% YoY to $9.457 billion, reversing the prior-year declines. EPS of $6.75 beat the year-ago $6.46, showing operating leverage as volumes recover.
Bearish
- Severe relative underperformance: CMI has declined 20.16% over the past three months versus a 3.34% gain for SPY, a negative relative strength of -23.50%. This sharp underperformance signals deep investor concern about the industrial cycle.
- Margin compression and earnings volatility: Gross margin fell to 26.07% in Q2 2026 from 26.39% a year ago, and operating margin declined to 13.52% from 14.18%. Q4 2025 EPS of $4.29 was well below Q2 2026's $6.75, highlighting earnings volatility.
- Cyclical truck downcycle risk: The core Engine and Components segments face a North American heavy-duty truck downcycle, with 60% of sales in the US/Canada. A prolonged freight recession could further pressure volumes and pricing.
- High leverage and valuation multiples: Debt-to-equity of 65.7% and EV/EBITDA of 14.02x are elevated for an industrial cyclical. Price-to-book of 5.70x leaves little room for error if earnings disappoint.
CMI Technical Analysis
Beta
1.24
1.24x market volatility
Max Drawdown
-29.0%
Largest decline past year
52-Week Range
$401-$738
Price range past year
Annual Return
+19.2%
Cumulative gain past year
| Period | CMI Return | S&P 500 |
|---|---|---|
| 1m | -7.7% | +0.9% |
| 3m | -23.2% | +3.4% |
| 6m | -16.0% | +14.4% |
| 1y | +19.2% | +16.2% |
| ytd | -0.9% | +14.0% |
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CMI Fundamental Analysis
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?
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 significant financial and operational risks. Debt-to-equity of 65.7% is manageable but leaves limited flexibility if the truck cycle worsens. Gross margin has compressed to 26.07% in Q2 2026 from 26.39% a year earlier, and operating margin fell to 13.52% from 14.18%, indicating pricing and cost pressures. Revenue is highly concentrated in North America (60% of sales) and in diesel engine technology, which faces long-term secular decline. Earnings are volatile: quarterly EPS has ranged from $4.29 (Q4 2025) to $6.75 (Q2 2026), and the company must sustain growth to justify its 24.76x trailing PE. Free cash flow of $3.367 billion TTM provides a cushion, but continued heavy R&D ($385 million in Q2 2026) for Accelera could strain resources if returns are delayed.
Market and competitive risks are elevated. CMI trades at a premium to many industrial peers on price-to-book (5.70x) and EV/EBITDA (14.02x), leaving it vulnerable to multiple compression if growth stalls. The stock's beta of 1.226 means it amplifies market moves, and its 20.16% three-month decline versus SPY's 3.34% gain shows severe relative weakness. Competition is intensifying: the Generac-Amazon deal highlights rivals targeting data-center backup power, a segment Cummins must defend. Regulatory risks around emissions standards could raise compliance costs, while a strong dollar or trade tensions could hurt international sales (40% of revenue). Sector rotation away from industrials into AI-driven tech could further pressure the multiple.
The worst-case scenario involves a synchronized global industrial recession, a continued North American truck downcycle, and failure to win meaningful data-center power contracts. In that scenario, CMI could retest its 52-week low of $400.72, representing a 24.2% decline from the current $528.32. The analyst low target of $530 is essentially at the current price, suggesting limited downside according to some analysts, but the stock's max drawdown of -29% over the past year shows how quickly sentiment can deteriorate. If earnings miss and the forward PE fails to hold at 15.28x, the stock could fall to $450 or lower, a 15% drop. Investors could lose 24% to 30% from current levels in a severe downturn.
FAQ
The most severe risk is a prolonged North American truck downcycle, which could reduce revenue and earnings, given 60% of sales are in the US/Canada. Second, margin compression is a concern, with gross margin falling to 26.07% in Q2 2026 from 26.39% a year earlier. Third, competitive threats in the data-center power market, such as Generac's $2.4 billion Amazon deal, could limit Cummins' growth. Fourth, high leverage (debt-to-equity of 65.7%) and heavy R&D spending on Accelera could strain cash flow if returns are delayed. These risks are ranked from most to least severe.
Our 12-month forecast has a base case (50% probability) of $700-$780, assuming EPS meets the $40.28 consensus and the stock trades to the analyst average target of $741.26. The bull case (30% probability) targets $800-$894 if data-center power contracts accelerate and margins recover. The bear case (20% probability) targets $400-$530 if a recession deepens and Cummins loses data-center share. The most likely scenario is the base case, driven by steady Power Systems growth offsetting truck weakness. Key assumption: no severe global recession and stable gross margins around 26%.
CMI appears fairly valued to slightly undervalued on a forward basis. The forward PE of 15.28x is below the trailing PE of 24.76x, suggesting expected earnings growth. However, the price-to-book ratio of 5.70x and EV/EBITDA of 14.02x are above typical industrial averages, indicating a premium for Cummins' market position and power-generation growth prospects. The market is pricing in mid-single-digit revenue growth and stable margins. If data-center power demand accelerates, the stock could re-rate higher; if the truck cycle worsens, the multiple could compress.
CMI is a reasonable buy for value-oriented investors with a medium-term horizon, given the 40.3% upside to the analyst average target of $741.26 and a forward PE of 15.28x. However, the stock has fallen 20.16% over three months, and the truck cycle remains a headwind. The biggest downside risk is a retest of the 52-week low of $400.72, representing 24.2% downside. For those willing to tolerate cyclicality, the data-center power opportunity could drive significant upside. It is less suitable for investors seeking low volatility or immediate momentum.
CMI is better suited for long-term investment (minimum 2-3 years) due to its cyclical nature and the time needed for the data-center power opportunity to materialize. The stock's beta of 1.226 indicates above-average volatility, and its 20.16% three-month decline shows short-term trading risk. The dividend yield of 1.50% and 37.1% payout ratio provide income for patient investors. Earnings visibility is moderate, with analyst EPS estimates ranging from $30.44 to $43.70. Short-term traders might exploit volatility, but the risk/reward favors long-term holding to capture the power-generation growth story.