Cummins
CMI
$531.39
+0.15%
Cummins Inc. designs and manufactures diesel and alternative-fuel engines, powertrain components (filtration, turbochargers, aftertreatment, fuel systems, transmissions), and power generation equipment for heavy- and medium-duty trucks, off-highway equipment, locomotives, and standby/prime power applications, operating in the Industrial Machinery sector with roughly 60% of sales in the US and Canada and 40% internationally, much of it through joint ventures in China and India. Its vertically integrated architecture and 650 distributors plus 19,000+ dealer locations across 190 countries give it a scale and service-density moat, but its business model is structurally unusual because it competes with many of the same heavy-duty truck OEMs that are also its largest customers. The current investor debate centers on the durability of the demand cycle after a strong second quarter of 2026 (revenue up 9.4% year over year to $9.46 billion) gave way to a sharp multi-month share-price decline, with investors weighing whether the pullback reflects a cyclical peak in North American truck and industrial demand or an attractive entry point into a business still generating roughly $3.4 billion in trailing free cash flow. Secondary narratives include the drag from the early-stage Accelera zero-emission segment, the margin-accretive Distribution and Power Systems mix, and tariff and emissions-regulation uncertainty across its international JV footprint.…
CMI
Cummins
$531.39
Related headlines
Investment Opinion: Should I buy CMI Today?
Rating: Buy (contrarian, medium conviction). The core thesis is that Cummins is a high-quality industrial franchise trading at a deep discount to its own history and to analyst targets after a sharp, multiple-driven selloff, with a 38.5% upside to the $716.66 average target and a 14.9x forward PE that already discounts cyclical caution. The analyst consensus of 'buy' (mean rating 1.82) and the absence of downgrades in the visible record support the view that the selloff is a valuation opportunity rather than a fundamental deterioration.
Supporting evidence: (1) Revenue grew 9.42% YoY in Q2 2026 to $9.457 billion, with sequential expansion from $8.398 billion in Q1; (2) trailing free cash flow of $3.367 billion provides a 4.8% FCF yield, well above the 1.50% dividend yield and supported by a 37.1% payout ratio; (3) the forward PE of 14.86x is a steep discount to the trailing 24.76x and to the high-teens/low-twenties typical of industrial peers; (4) ROE of 23.0% and a debt-to-equity of 0.657 confirm efficient capital deployment and balance sheet strength. The implied upside to the average target is 38.5%, and even the low target of $530 is 2.4% above the current price, suggesting the bear case is priced in.
Risks and conditions: The biggest risks are a cyclical peak in North American truck demand, margin compression (Q4 2025 operating margin fell to 7.50%), and a cut to the $40.34 consensus EPS. This Buy would downgrade to Hold if the stock breaks below the $516 support and tests the 52-week low of $413.98, or if forward EPS estimates are cut by more than 10%. It would upgrade to Strong Buy if the stock reclaims the $542 resistance and the $606 gap zone, confirming trend repair. Valuation verdict: the stock is undervalued relative to its own history (trailing PE of 24.76x is in the upper-middle of its 5.2x–29.7x range, but the forward PE of 14.86x is near the low end) and relative to analyst targets, offering a favorable risk/reward for patient investors.
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CMI 12-Month Price Forecast
The forward-looking view is cautiously bullish: the stock has de-rated sharply to a 14.86x forward PE, well below its trailing 24.76x and typical industrial peer multiples, while revenue growth of 9.42% and a 4.8% FCF yield remain intact. The analyst consensus of 'buy' with a $716.66 average target and no recent downgrades suggests the selloff is a valuation opportunity, but the wide target range ($530–$890) and the 1.238 beta signal meaningful disagreement and volatility. The key risk is a cyclical peak in North American truck demand, which could cut the $40.34 EPS consensus and drive the stock toward the $413.98 52-week low. I would upgrade to high confidence if the stock reclaims the $542 resistance and Q3 2026 earnings show operating margin above 13%, and downgrade to neutral if the stock breaks below $516 and tests the 52-week low.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Cummins's 12-month outlook, with a consensus price target around $708.66 and implied upside of +33.4% versus the current price.
Average Target
$708.66
0 analysts
Implied Upside
+33.4%
vs. current price
Analyst Count
—
covering this stock
Price Range
$530 - $890
Analyst target range
Coverage is robust with 19 analysts and a consensus recommendation of "buy" (mean rating 1.82 on a 1-to-5 scale where 1 is a strong buy), and the average target price of $716.66 implies roughly +38.5% upside from the current $517.40 — a strikingly bullish signal given the stock's 22% three-month decline. The consensus leans clearly bullish, with the recent institutional ratings log showing a preponderance of Buy/Outperform/Overweight ratings from UBS, Citigroup, Truist, Wells Fargo, Morgan Stanley, Evercore ISI, Raymond James, and Argus, and only JP Morgan at Neutral as of September 23, 2026. Notably, UBS upgraded from Neutral to Buy on June 8, 2026, and no downgrades appear in the visible record, suggesting analysts view the selloff as a valuation opportunity rather than a fundamental deterioration. The target range is wide — $530 low to $890 high against a $716.66 average — a spread of roughly 68% of the average target that signals meaningful disagreement about the cycle. The $890 high target implies multiple expansion back toward the stock's late-2025 peak levels and assumes the 9.4% revenue growth sustains alongside margin recovery and a resolution of tariff/regulatory overhangs, while the $530 low target — only about 2.4% above the current price — effectively prices in flat-to-modest earnings, continued margin pressure, and a prolonged industrial downturn. Consensus EPS estimates of $40.34 average (range $34.25–$42.73) on revenue of $44.78 billion average (range $41.90–$48.12 billion) underpin the bullish case, and the fact that the low target sits almost exactly at the current price suggests the market has already priced in the bear case, leaving asymmetric upside if the base case materializes.
Bulls vs Bears: CMI Investment Factors
The bear case currently has stronger near-term evidence: the stock is in a confirmed downtrend (-29% max drawdown, -22% over three months, trailing SPY by 25 points) and has erased all 2026 gains, reflecting fears of a cyclical peak in North American truck and industrial demand. However, the bull case is supported by hard fundamentals: 9.4% revenue growth, a 4.8% FCF yield, a conservative balance sheet, and a 38.5% upside to the analyst average target of $716.66. The single most important tension is whether the forward EPS consensus of $40.34 is achievable; if it holds, the 14.9x forward PE is a deep discount and the stock is oversold, but if estimates are cut, the low target of $530 leaves little downside cushion. The market appears to have priced in the bear case, creating asymmetric upside if the base case materializes, but the cyclical risk is real and the technical trend remains broken.
Bullish
- Analyst consensus implies 38.5% upside: 19 analysts rate CMI a 'buy' with a mean rating of 1.82 and an average target of $716.66, 38.5% above the $517.40 price. The low target of $530 sits just 2.4% above the current price, suggesting the bear case is already largely priced in.
- Forward PE of 14.9x is cheap: The forward PE of 14.86x is well below the trailing 24.76x and below the high-teens to low-twenties typical for industrial machinery peers. This discount implies the market is skeptical of the $40.34 consensus EPS, creating potential for multiple expansion if estimates hold.
- Revenue growth intact at 9.4% YoY: Q2 2026 revenue rose 9.42% to $9.457 billion from $8.643 billion, with sequential growth from $8.398 billion in Q1. The selloff is multiple-driven, not demand-driven, as the core Engine, Distribution, and Power Systems segments continue to expand.
- Strong FCF and well-covered dividend: Trailing free cash flow of $3.367 billion yields roughly 4.8% on the $70.4 billion market cap, and Q2 2026 FCF of $1.25 billion comfortably funded $276 million of dividends and $225 million of buybacks. The 1.50% dividend yield with a 37.1% payout ratio leaves ample room for growth.
Bearish
- Severe downtrend with -29% max drawdown: The stock is 29.9% below its 52-week high of $737.76 and has erased all 2026 gains (YTD -0.89%), with a -29.0% max drawdown confirming a broken uptrend. It sits at roughly 30% of its 52-week range, closer to capitulation than momentum leadership.
- Massive relative underperformance vs. SPY: CMI trails SPY by 25.0 percentage points over three months and 28.1 points over six months, despite leading by 10.7 points over twelve months. This classic mean-reversion pattern of a former leader suggests the market is repricing the cyclical peak.
- Wide analyst target spread signals disagreement: The target range of $530 to $890 spans roughly 68% of the $716.66 average, indicating significant disagreement about the cycle. The $530 low target implies flat-to-modest earnings and continued margin pressure, while the $890 high assumes a return to late-2025 peak multiples.
- Margin volatility and Q4 2025 operating margin dip: Operating margin fell to 7.50% in Q4 2025 from 13.87% in Q1 2025, showing the business is not immune to cost or mix shocks. Gross margin has ranged from 22.86% to 26.71% over the last four quarters, and the trailing operating margin of 11.95% is below the Q2 2026 level of 13.52%.
CMI Technical Analysis
Cummins is in a clear intermediate downtrend despite a still-positive one-year return of +23.86%, a divergence that reflects a strong first half giving way to a severe second-half slide. At $517.40, the stock sits just 24.4% above its 52-week low of $413.98 and 29.9% below its 52-week high of $737.76, placing it at roughly 30% of its 52-week range — deep in the lower third and closer to capitulation territory than to momentum leadership. The -29.0% max drawdown confirms this is a broken uptrend rather than a shallow pullback, and the price is now below where it traded at the start of the year (YTD -0.89%), meaning all of 2026's gains have been erased. Recent momentum is weak but stabilizing: the 1-month change of -1.38% is a marked deceleration from the -22.15% three-month and -21.70% six-month declines, suggesting the selling pressure is losing force. Relative strength tells the same story — CMI trails SPY by 25.0 percentage points over three months and 28.1 points over six months, yet still leads by 10.7 points over twelve months, a classic pattern of a former leader mean-reverting. The stock has chopped in a $517–$542 band since late September after bottoming near $516.57 on September 30, with the October 23 close of $517.40 sitting at the low end of that consolidation. Key support rests at the $516–$517 shelf, with the 52-week low of $413.98 as the deeper floor; resistance sits at the $542 recent swing high and then the $606–$634 gap zone from the late-July breakdown, with the $737.76 high as the long-term ceiling. A break below $516 would likely retest the $500 psychological level and open the door toward the 52-week low, while reclaiming $542 would signal a short-term base and a move through $606 would confirm trend repair. With a beta of 1.238, Cummins is roughly 24% more volatile than the S&P 500, so position sizing should account for amplified drawdowns in a downtrend — the 3.59 short ratio also implies short sellers are not aggressively pressing the name, which modestly reduces squeeze-driven downside risk.
Beta
1.24
1.24x market volatility
Max Drawdown
-29.0%
Largest decline past year
52-Week Range
$419-$738
Price range past year
Annual Return
+28.3%
Cumulative gain past year
| Period | CMI Return | S&P 500 |
|---|---|---|
| 1m | +2.6% | +0.9% |
| 3m | -16.0% | +4.1% |
| 6m | -19.2% | +7.2% |
| 1y | +28.3% | +12.4% |
| ytd | +1.8% | +13.3% |
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CMI Fundamental Analysis
Revenue is growing at a healthy clip: Q2 2026 revenue of $9.457 billion rose 9.42% year over year versus $8.643 billion in Q2 2025, and the sequential progression from $8.398 billion in Q1 2026 and $8.536 billion in Q4 2025 shows steady expansion rather than a one-quarter spike. Segment data for the period shows the Engine business at $3.084 billion, Distribution at $3.326 billion, Components at $2.891 billion, and Power Systems at $2.255 billion, with Accelera still immaterial at $145 million and $2.244 billion of intersegment eliminations — meaning the core engine and distribution/service businesses are carrying growth while the zero-emission bet remains a rounding error. The trajectory implies mid-to-high single-digit top-line growth is intact, which is notable given the stock's 22% three-month decline and suggests the selloff is multiple-driven rather than demand-driven. Profitability is solid and improving: Q2 2026 net income of $932 million on a 9.86% net margin and 26.07% gross margin compares favorably to Q2 2025's $890 million and 10.30% net margin, while operating income of $1.279 billion (13.52% operating margin) expanded from $1.226 billion a year earlier. Gross margin has been range-bound between 22.86% (Q4 2025) and 26.71% (Q1 2026) over the last four quarters, and the trailing figures of 25.29% gross and 11.95% operating margin are consistent with a capital-intensive industrial manufacturer. The key watch item is the Q4 2025 dip to a 7.50% operating margin, which shows the business is not immune to cost or mix shocks even as the current trend is favorable. The balance sheet is conservatively managed: debt-to-equity of 0.657, a current ratio of 1.76, and interest coverage of roughly 16x in Q2 2026 provide ample cushion, while trailing free cash flow of $3.367 billion against a $70.4 billion market cap implies a roughly 4.8% FCF yield — attractive for an industrial. Q2 2026 operating cash flow of $1.499 billion funded $249 million of capex, $276 million of dividends, and $225 million of buybacks, leaving free cash flow of $1.25 billion and lifting cash to $3.179 billion; the main blemish is Q1 2026's weak $120 million FCF on a $561 million working-capital drain, a reminder that cash generation is seasonally lumpy. ROE of 23.0% and ROA of 7.0% confirm efficient capital deployment, and with a 1.50% dividend yield and a 37.1% payout ratio, the dividend is well covered with room to grow.
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 (Q2 2026 net income of $932 million), the PE ratio is the appropriate primary metric rather than PS or EV/Sales. The trailing PE of 24.76x versus a forward PE of 14.86x implies the market expects earnings to grow roughly 67% — a gap that is unusually wide and reflects either depressed trailing earnings or an aggressive forward consensus, and given the reported $0.04 trailing EPS figure in the key metrics (which appears inconsistent with the $6.75 quarterly EPS and likely reflects a data artifact), the forward multiple is the more reliable anchor. On forward earnings the stock looks inexpensive for a quality industrial, but the market is clearly discounting the forward estimate. Against the sector, Cummins trades at a PS of 2.09x, EV/Sales of 2.22x, and EV/EBITDA of 14.02x, with a P/B of 5.70x and P/CF of 19.44x — the EV/EBITDA multiple is roughly in line with mature industrial machinery peers, while the 5.70x book multiple is elevated and reflects the asset-light service and distribution mix rather than a premium growth profile. The PEG ratio of -0.89 is not meaningful given the earnings-base distortion, so the more useful read is that a 14.9x forward PE for a business growing revenue ~9% with a 4.8% FCF yield represents a discount to the broader industrial sector, which typically trades in the high-teens to low-twenties forward PE range. Historically, Cummins' own PE has ranged from roughly 5.2x (Q1 2024) to 29.7x (Q4 2025), with the trailing 24.76x sitting in the upper-middle of that band, while the PS of 2.09x is well below the 8.3x–10.4x readings recorded in the 2025–2026 historical ratio series (which appear to be computed on a different share/price basis) and closer to the 3.8x–5.7x range seen in 2022–2024. The most defensible conclusion is that the stock has de-rated sharply from its late-2025 peak multiples and now trades near the lower end of its recent valuation band, pricing in cyclical caution rather than optimism — a setup that offers value if earnings estimates hold but leaves little cushion if the industrial cycle deteriorates further.
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
Financial and operational risks center on margin volatility and cash flow lumpiness. Q4 2025 operating margin fell to 7.50% from 13.87% in Q1 2025, and gross margin has ranged from 22.86% to 26.71% over the last four quarters, showing susceptibility to cost and mix shocks. Q1 2026 free cash flow was only $120 million on a $561 million working-capital drain, a reminder that cash generation is seasonally uneven despite trailing FCF of $3.367 billion. Revenue concentration is another concern: roughly 60% of sales are in the US and Canada, and the Engine segment ($3.084 billion in Q2 2026) plus Distribution ($3.326 billion) carry the business while Accelera remains immaterial at $145 million. The balance sheet is solid with debt-to-equity of 0.657 and 16x interest coverage, but the cyclical nature of heavy-duty truck demand means earnings could deteriorate quickly if the industrial cycle turns.
Market and competitive risks are significant given the stock's 1.238 beta, which implies roughly 24% more volatility than the S&P 500 and amplifies drawdowns in a downtrend. The stock has already de-rated sharply, with a trailing PE of 24.76x versus a forward PE of 14.86x, implying the market expects 67% earnings growth; if that expectation is not met, multiple compression could continue. Competitive disruption is a structural threat because Cummins competes with many of the same heavy-duty truck OEMs that are its largest customers, and the shift toward zero-emission powertrains could erode its diesel engine franchise over time. Regulatory and tariff uncertainty across its international JV footprint in China and India adds another layer of risk, and the recent news flow (while focused on peer Generac) highlights the premium valuations and execution demands in the power generation space where Cummins' Power Systems segment competes.
Worst-case scenario: a synchronized North American truck downturn combined with margin compression and a cut to the $40.34 consensus EPS would likely drive the stock toward its 52-week low of $413.98, a decline of roughly 20% from the current $517.40. If the low analyst target of $530 is breached and the market prices in a prolonged industrial recession, the stock could test the $413.98 floor, implying a loss of about 20% from current levels. A more severe scenario, such as a global recession and a collapse in Power Systems demand, could push the stock below the 52-week low toward the $400 psychological level, a drawdown of roughly 23% from the current price. The -29.0% max drawdown already experienced shows that such a move is within the realm of possibility.
FAQ
The most severe risk is cyclical: roughly 60% of sales are in the US and Canada, and a North American heavy-duty truck downturn could cut the $40.34 EPS consensus and drive the stock toward the $413.98 52-week low, a 20% decline. Margin volatility is a close second, with Q4 2025 operating margin falling to 7.50% from 13.87% in Q1 2025, showing susceptibility to cost and mix shocks. Competitive disruption from zero-emission powertrains is a structural threat, as Cummins competes with the same OEM customers that are investing in electric and hydrogen alternatives, while Accelera remains immaterial at $145 million. Finally, regulatory and tariff uncertainty across China and India JVs adds international risk, and the 1.238 beta amplifies drawdowns in a market selloff.
The 12-month forecast has three scenarios: a 30% probability bull case targeting $716–$890 (analyst average to high), a 50% probability base case targeting $530–$717 (low target to average), and a 20% probability bear case targeting $414–$530 (52-week low to low target). The base case is most likely, assuming mid-to-high single-digit revenue growth continues, margins hold in the 11–13% operating range, and the $40.34 EPS consensus is largely met. The key assumption is that North American truck demand stabilizes without a sharp downturn; if it does not, the bear case could materialize with a retest of the $413.98 low.
CMI appears undervalued on forward earnings: the forward PE of 14.86x is well below the trailing 24.76x and below the high-teens to low-twenties typical of industrial machinery peers. The trailing PE sits in the upper-middle of its historical 5.2x–29.7x range, but the forward multiple is near the low end, implying the market expects 67% earnings growth and is discounting the $40.34 consensus EPS. The PS of 2.09x and EV/EBITDA of 14.02x are roughly in line with mature industrial peers, while the 5.70x P/B reflects the asset-light service mix. The market is pricing in cyclical caution rather than optimism, leaving room for multiple expansion if estimates hold.
From a risk/reward perspective, CMI offers a favorable setup for patient investors: the stock trades at $517.40, 38.5% below the analyst average target of $716.66, and the low target of $530 is only 2.4% above the current price, suggesting the bear case is largely priced in. The forward PE of 14.86x is a steep discount to the trailing 24.76x and to industrial peers, while revenue growth of 9.42% and a 4.8% FCF yield remain intact. The biggest downside risk is a cyclical peak in North American truck demand, which could drive the stock toward the 52-week low of $413.98, a roughly 20% decline. It is a good buy for value-oriented investors with a 12–18 month horizon who can tolerate volatility (beta 1.238), but less suitable for short-term traders given the broken uptrend and -29% max drawdown.
CMI is better suited for long-term holding (minimum 12–18 months) than short-term trading. The stock is in a confirmed downtrend (-22% over three months, -29% max drawdown) with a 1.238 beta, making short-term trading risky and timing-dependent. The dividend yield of 1.50% with a 37.1% payout ratio and 4.8% FCF yield provide income and value support for patient investors, while the 38.5% upside to the analyst average target requires time for cyclical fears to fade. Earnings visibility is moderate given the cyclical nature of truck demand, so a long-term investor should monitor the forward EPS consensus and the $516 support level. A suggested minimum holding period is 12–18 months to allow the base case to play out.