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Hyperscale AI data center backup power generation and prime power microgrid deployment represent Cummins' largest commercial opportunity.
Post-regulatory prebuy demand contraction in North American Class 8 heavy-duty truck builds exceeding 20% YoY following EPA MY2027 rule implementation.
Cummins Inc. (CMI) trades at a 22.2% premium over its fair value midpoint of $443.65, warranting a Reduce rating as current market pricing at $542.21 aggressively discounts AI data center generator momentum while underestimating impending 2027 commercial truck volume moderation and emissions transition costs.45
Cummins delivered record second-quarter 2026 financial results, raising full-year revenue growth guidance to 10%-13% and EBITDA margin to 18.0%-18.5%. Operating outperformance is propelled by the Power Systems segment, where global power generation revenues are guided to expand 15% to 25% in 2026 with segment reaching 25.0% to 25.75%. Unprecedented electricity grid constraints have forced hyperscale AI data centers to procure utility-scale diesel and natural gas backup gensets, extending Cummins' delivery commitments into the second half of 2028. Concurrently, the captive Distribution segment ($12.41B in FY2025 net sales) generates recurring aftermarket parts and service .
However, the market has extrapolated these near-term operational tailwinds into an excessive valuation multiple. At $542.21 per share, Cummins trades at an implied return of -18.2% relative to our synthesized fair value midpoint of $443.65 (representing a 22.2% price premium to fair value). This valuation fails to discount a looming cyclical slowdown in the core Engine business ($10.88B in FY2025 revenue). Management acknowledged expected demand moderation in North American truck builds in 2027 following the clarification of EPA Model Year 2027 emissions rules, which will unwind the 2026 prebuy cycle.458
Furthermore, the rollout of new X10 and X15 engine platforms introduces substantial warranty and manufacturing execution risks. While current warranty expenses sit at historical lows in the low 2% range, past emissions transitions have triggered cost spikes that compress operating margins. With 1H 2026 consolidated EBITDA margin already showing year-over-year compression to 16.5% from 18.1% and CapEx expanding to $1.35B-$1.45B to fund 20 GW of capacity additions, free cash flow generation will face headwinds. We advise reducing portfolio exposure and waiting for a more attractive entry valuation.5
Global power generation revenue is expanding 15% to 25% in 2026 with Power Systems EBITDA margins of 25.0% to 25.75%, underpinned by utility-scale backup generator delivery commitments booked into late 2028.5
The captive Distribution segment generated $12.41B in net revenue during FY2025, providing steady, high-margin aftermarket parts and maintenance income across commercial fleets and industrial installations.8
Deep integration with leading truck builders like PACCAR (13% of consolidated sales) and proprietary emissions technologies allow Cummins to capture value and pass through regulatory platform costs.58
Reduce position. Cummins is executing well in power generation, but at $542.21 the market has overshot intrinsic fair value ($443.65). Trim holdings to protect capital ahead of 2027 commercial vehicle demand moderation and emissions platform warranty risks.4
Cummins Inc. is a global power technology leader founded in 1919 and headquartered in Columbus, Indiana. The company designs, manufactures, distributes, and services a broad portfolio of power solutions across five operating segments: Engine, Components, Distribution, Power Systems, and Accelera by Cummins. In FY2025, Cummins generated $33.67B in net revenue and $4,025M in operating income.
The company serves commercial vehicle original equipment manufacturers, industrial customers, and critical infrastructure operators globally. Its largest customer is PACCAR Inc., accounting for 13% of consolidated sales in FY2025 ($4.4B). Geographic operations are diversified, with the United States generating $18.97B and international markets generating $9.68B, anchored by extensive manufacturing joint ventures in China ($3.30B) and India ($1.72B).
A compound stress test evaluates a simultaneous occurrence of an on-highway truck freight contraction, platform warranty cost escalation, and elevated capital intensity. If North American Class 8 truck builds fall 20% post-EPA prebuy while warranty costs on newly introduced X10 and X15 engines rise 150 basis points above historical 2% baselines, consolidated operating margin would decline to 10.5% (down from 11.95% in FY2025). Concurrently, maintaining guided CapEx of $1.35B to $1.45B to support 20 GW of power generation capacity additions would constrain free cash flow generation. Under this stressed operating environment discounted at the strict cost of equity of 10.211%, Cummins' equity fair value contracts toward the conservative valuation floor of $337.47, exposing investors holding shares at $542.21 to substantial capital downside.
The Bear scenario incorporates a sharp post-prebuy contraction in North American Class 8 truck builds (-20% YoY), combined with elevated initial warranty accruals on EPA MY2027 platforms exceeding 3.5% of sales. Consolidated operating margins compress to 10.5% and revenue growth decelerates toward 2%, while macroeconomic rate pressures push cost of capital to strict Ke 10.211%. This path establishes the conservative valuation boundary of $337.47.
North American Class 8 heavy-duty truck build and order volume contracts by more than 20% YoY over a 12-month horizon as freight demand weakens following the EPA Model Year 2027 emissions clarification. Because largest OEM partner PACCAR represents 13% of consolidated sales and the Engine segment delivered $10.88B in FY2025, an abrupt order drop would compress factory absorption, driving an estimated 24.5% fair value impairment.58
Die fünf Entwicklungen, die unsere Anlagethese schwächen würden.
Severe commercial vehicle freight recession following EPA MY2027 regulatory transition, collapsing overhead absorption in Engine and Components segments.
Aktuell:Stronger North American truck volumes supporting 2026 guidance
Alarm, wennYear-over-year contraction exceeding 20% in Class 8 builds
Cummins possesses a Narrow economic moat grounded in structural switching costs and scale-based distribution advantages. As an independent power technology provider, the company co-engineers diesel and alternative-fuel powertrains directly into commercial vehicle platforms produced by leading original equipment manufacturers. Its largest customer relationship, PACCAR Inc., accounted for 13% of consolidated net sales in FY2025. The technical complexity of integrating electronic controls, aftertreatment, and transmission systems creates steep re-engineering and recertification costs for OEMs, locking in multi-year platform integration.
Complementing powertrain integration is Cummins' extensive global Distribution segment, which generated $12.41B in net revenue during FY2025. Operating across hundreds of company-owned and independent distributor locations worldwide, this network provides high-margin aftermarket replacement parts, scheduled maintenance, and field support. Because commercial fleet operators and hyperscale data center facilities prioritize asset uptime and reliability over equipment purchase price discounts, Cummins' service density creates a durable customer retention barrier that competing engine manufacturers cannot easily dislodge.
However, the moat remains classified as Narrow rather than Wide due to medium-term cyclical exposure to commercial vehicle build cycles, customer concentration among a small cohort of global truck manufacturers, and the capital expenditure required to transition powertrains to zero-emissions architectures. With peers in specialized automation generating higher operating margins (such as AMETEK at 26.2%), Cummins' capital intensity and ongoing Accelera segment losses ($260M to $290M net loss guided for 2026) limit the durability of excess returns beyond a 10-year horizon.
Cummins generates structural returns in excess of its moderate cost of equity of 9.9414%, supported by operating income of $4,025M in FY2025 and high-margin aftermarket distribution parts sales.27
Each lens answers a different valuation question. Only included lenses set Fair value; floors and diagnostics provide context.
The highlighted cell is Fair value when every assumption sits at its base level ($443.65). Each row and column shows what Fair value becomes when one assumption moves.
A free-cash-flow drop test is not available in this run; use the discount-rate and terminal-growth grid as the primary valuation pressure test.
In the Bull scenario, persistent hyperscale AI data center expansion sustains utility-scale backup generator demand well beyond 2028. Power Systems delivers top-of-range revenue growth of 19% with EBITDA margins reaching 25.75%. The EPA MY2027 engine transition proceeds seamlessly with complete cost pass-through and minimal warranty disruption, while China and India joint ventures accelerate. This optimistic operating path supports the upper valuation bound of $523.74.5
Operational outperformance confirms strong near-term execution, but because the shares at $542.21 already reflect an implied return of -18.2% relative to intrinsic value ($443.65), a beat is already discounted.
Meeting guidance confirms peak-cycle financial performance without resolving the impending 2027 demand moderation in heavy-duty trucks or warranty launch risks.
A miss would indicate accelerated truck freight demand contraction or inability to pass through emissions platform costs, triggering valuation multiple de-rating toward historical trough levels.
Cummins demonstrates high underlying earnings quality, supported by robust cash flow conversion where FY2025 operating cash flow of $3,621M substantially exceeded net income of $2,843M. However, reported results reflect some non-operational volatility, including a $199M pre-tax charge in 1H 2026 associated with the divestiture of the low-pressure fuel cell business and customer obligation settlements.47
Post-Q2 2026 earnings estimate revisions show constructive momentum. Full-year consensus revenue for FY2026 increased from $37.27B to $37.67B, and FY2027 consensus revenue rose to $41.34B. FY2027 diluted EPS consensus advanced from $32.29 to $34.34, reflecting raised management outlooks driven by data center power generation strength.15
Signals whether commercial fleet demand is cooling post-regulatory prebuy, directly impacting the $10.88B Engine segment and Components division.8
Cash generation is robust and structurally supports Cummins' reinvestment requirements. In FY2025, operating cash flow reached $3,621M, which funded capital expenditures of $1,235M and generated free cash flow of $2,386M. In the first six months of 2026, operating cash flow expanded to $1,808M (up from $782M in 1H 2025), driven by operating income and working capital discipline. Free cash flow for 1H 2026 reached $1,370M after $438M of capital investments. Free cash flow conversion is bolstered by the Distribution segment's recurring aftermarket parts income ($12.41B in FY2025 sales).678
Cummins maintains a disciplined capital allocation framework aimed at returning 50% of to shareholders across the industrial cycle. In Q2 2026, the company returned $501M via cash dividends and share repurchases, raising its quarterly common dividend from $2.00 to $2.20 per share (marking 17 consecutive years of dividend growth). reduced modestly to 138.7M shares. are ramping to $1.35B-$1.45B in 2026 (from $1,235M in FY2025) to support 20 GW of flexible capacity additions. stood at $6,737M as of June 30, 2026, maintaining strong liquidity.
Cummins' return on invested capital has stabilized and shows moderate upward trajectory as Power Systems margin expansion takes effect. Consolidated operating income of $4,025M on $33.67B of sales in FY2025 represents an operating margin of 11.95%, which is modeled to expand toward 12.8% in FY2026 and 13.5% over the medium term. Operating returns are defended by aftermarket distribution and pricing realization on heavy-duty powertrains.
Return on invested capital exceeds the moderate cost of equity of 9.9414% and the strict cost of equity of 10.211%, generating positive economic value spread across mid-cycle industrial demand.
Power Systems EBITDA margin guided to 25.0%-25.75% in 2026 on 15%-25% power generation , compared to consolidated FY2025 margin of 11.95%.
| Umsatz | 33.670.000.000 $ |
|---|---|
| Umsatzkosten | 25.154.000.000 $ |
| Bruttogewinn | 8.516.000.000 $ |
| Betriebliche Aufwendungen | 4.491.000.000 $ |
| Betriebsergebnis | 4.025.000.000 $ |
| Nicht operative Posten und Steuern | -1.182.000.000 $ |
| Nettogewinn | 2.843.000.000 $ |
| Gesamtvermögen | 33.992.000.000 $ |
|---|---|
| Liquide Mittel | 2.845.000.000 $ |
| Umlaufvermögen | 16.925.000.000 $ |
| Gesamtverbindlichkeiten | 20.584.000.000 $ |
| Kurzfristige Verbindlichkeiten | 9.610.000.000 $ |
| Eigenkapital | 13.408.000.000 $ |
| Nettogewinn | 2.843.000.000 $ |
|---|---|
| Operativer Mittelzufluss | 3.948.000.000 $ |
| Abschreibungen | 1.105.000.000 $ |
| Operativer Cashflow | 3.621.000.000 $ |
| Operativer Mittelabfluss | 327.000.000 $ |
| Verfügbare Zahlungsmittel | 5.348.000.000 $ |
| Anfangsbestand Zahlungsmittel | 1.671.000.000 $ |
| Wechselkurseffekt | 56.000.000 $ |
| Mittelabfluss aus Investitionen | 1.731.000.000 $ |
| Investitionsausgaben | 1.235.000.000 $ |
| Sonstige Investitionstätigkeiten | 496.000.000 $ |
| Mittelabfluss aus Finanzierung | 772.000.000 $ |
| Netto-Schuldenaufnahme | 454.000.000 $ |
| Gezahlte Dividenden | 1.055.000.000 $ |
| Sonstige Finanzierungstätigkeiten | 171.000.000 $ |
| Endbestand Zahlungsmittel | 2.845.000.000 $ |
| Cashflow aus Investitionstätigkeit | -1.731.000.000 $ |
| Cashflow aus Finanzierungstätigkeit | -772.000.000 $ |
Quelle: SEC EDGAR · Eingereicht 2026-02-10 · SEC EDGAR
| Umsatz nach Region | Umsatz | Anteil | ggü. Vj. |
|---|---|---|---|
| United States | 19 Mrd. $ | 56,4 % | -2,3 % |
| Non Us | 9,7 Mrd. $ | 28,7 % | -2,8 % |
| China | 3,3 Mrd. $ | 9,8 % | 11,9 % |
| India | 1,7 Mrd. $ | 5,1 % | -3,3 % |
Punktbezogene Finanzdaten der Analyse vom 2026-10-22.
| Periode | Umsatz | EBITDA | Nettogewinn | Operativer Cashflow | Freier Cashflow | Investitionsausgaben | Abschreibungen | Aktienbasierte Vergütung | Aktienrückkäufe | Gezahlte Dividenden | Netto-Schuldenaufnahme | Cashflow aus Investitionstätigkeit | Cashflow aus Finanzierungstätigkeit | Anfangsbestand Zahlungsmittel | Endbestand Zahlungsmittel | Liquidität und Anlagen | Gesamtverschuldung | Operative Marge | ROIC | WACC | ROIC−WACC-Spanne |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2016-12-31 | 17,5 Mrd. $ | 2,5 Mrd. $ | 1,4 Mrd. $ | 1,9 Mrd. $ | 1,4 Mrd. $ | 531 Mio. $ | 530 Mio. $ | 32 Mio. $ | 778 Mio. $ | 676 Mio. $ | — | -917 Mio. $ | -1,4 Mrd. $ | — | 1,1 Mrd. $ | 1,4 Mrd. $ | 1,8 Mrd. $ | 10,7 % | — | 6,9 % | — |
| 2017-12-31 | 20,4 Mrd. $ | 3 Mrd. $ | 999 Mio. $ | 2,3 Mrd. $ | 1,8 Mrd. $ | 506 Mio. $ | 583 Mio. $ | 41 Mio. $ | 451 Mio. $ | 701 Mio. $ | — | -1,1 Mrd. $ | -1,1 Mrd. $ | 1,1 Mrd. $ | 1,4 Mrd. $ | 1,6 Mrd. $ | 2 Mrd. $ | 11,4 % | — | 6,4 % | — |
| 2018-12-31 | 23,8 Mrd. $ | 3,5 Mrd. $ | 2,1 Mrd. $ | 2,4 Mrd. $ | 1,7 Mrd. $ | 709 Mio. $ | 611 Mio. $ | 53 Mio. $ | 1,1 Mrd. $ | 718 Mio. $ | — | -974 Mio. $ | -1,4 Mrd. $ | 1,4 Mrd. $ | 1,3 Mrd. $ | 1,5 Mrd. $ | 2,5 Mrd. $ | 11,7 % | — | 6,7 % | — |
| 2019-12-31 | 23,6 Mrd. $ | 3,6 Mrd. $ | 2,3 Mrd. $ | 3,2 Mrd. $ | 2,5 Mrd. $ | 700 Mio. $ | 672 Mio. $ | 49 Mio. $ | 1,3 Mrd. $ | 761 Mio. $ | — | -1,2 Mrd. $ | -2,1 Mrd. $ | 1,3 Mrd. $ | 1,1 Mrd. $ | 1,5 Mrd. $ | 2,9 Mrd. $ | 11,5 % | — | 5,9 % | — |
| 2020-12-31 | 19,8 Mrd. $ | 3,1 Mrd. $ | 1,8 Mrd. $ | 2,7 Mrd. $ | 2,2 Mrd. $ | 528 Mio. $ | 673 Mio. $ | 31 Mio. $ | 641 Mio. $ | 782 Mio. $ | — | -719 Mio. $ | 280 Mio. $ | 1,1 Mrd. $ | 3,4 Mrd. $ | 3,9 Mrd. $ | 4,6 Mrd. $ | 11,5 % | — | 4,4 % | — |
| 2021-12-31 | 24 Mrd. $ | 3,5 Mrd. $ | 2,1 Mrd. $ | 2,3 Mrd. $ | 1,5 Mrd. $ | 734 Mio. $ | 662 Mio. $ | 37 Mio. $ | 1,4 Mrd. $ | 809 Mio. $ | — | -873 Mio. $ | -2,2 Mrd. $ | 3,4 Mrd. $ | 2,6 Mrd. $ | 3,2 Mrd. $ | 4,6 Mrd. $ | 11,3 % | — | 4,9 % | — |
| 2022-12-31 | 28,1 Mrd. $ | 3,8 Mrd. $ | 2,2 Mrd. $ | 2 Mrd. $ | 1 Mrd. $ | 916 Mio. $ | 784 Mio. $ | 36 Mio. $ | 374 Mio. $ | 855 Mio. $ | 2,8 Mrd. $ | -4,2 Mrd. $ | 1,7 Mrd. $ | 2,6 Mrd. $ | 2,1 Mrd. $ | 2,5 Mrd. $ | 8,4 Mrd. $ | 10,4 % | — | 6,8 % | — |
| 2023-12-31 | 34,1 Mrd. $ | 1,8 Mrd. $ | 735 Mio. $ | 4 Mrd. $ | 2,8 Mrd. $ | 1,2 Mrd. $ | 1 Mrd. $ | 79 Mio. $ | 0 $ | 921 Mio. $ | -1,1 Mrd. $ | -1,6 Mrd. $ | -2,2 Mrd. $ | 2,1 Mrd. $ | 2,2 Mrd. $ | 2,7 Mrd. $ | 7,2 Mrd. $ | 5,2 % | — | 6,6 % | — |
| 2024-12-31 | 34,1 Mrd. $ | 6,3 Mrd. $ | 3,9 Mrd. $ | 1,5 Mrd. $ | 279 Mio. $ | 1,2 Mrd. $ | 1,1 Mrd. $ | — | 0 $ | 969 Mio. $ | 915 Mio. $ | -1,8 Mrd. $ | -173 Mio. $ | 2,2 Mrd. $ | 1,7 Mrd. $ | 2,3 Mrd. $ | 7,6 Mrd. $ | 11,0 % | — | 7,5 % | — |
| 2025-12-31 | 33,7 Mrd. $ | 5,4 Mrd. $ | 2,8 Mrd. $ | 3,6 Mrd. $ | 2,4 Mrd. $ | 1,2 Mrd. $ | 1,1 Mrd. $ | — | — | 1,1 Mrd. $ | 454 Mio. $ | -1,7 Mrd. $ | -772 Mio. $ | 1,7 Mrd. $ | 2,8 Mrd. $ | 3,6 Mrd. $ | 8,1 Mrd. $ | 12,0 % | — | 7,7 % | — |
Cummins Inc. (CMI) trades at 15.4x forward earnings against a peer median of 23.3x. Its EV/EBITDA of 15.9x compares with a peer median of 19.9x. The comparison uses 4 peers: Emerson Electric Co., Parker-Hannifin Corporation, AMETEK Inc. and Ingersoll Rand Inc., as of 2026-10-22.
In the broader machinery industry, benchmark capital expenditures average 4.1% of revenue and capex-to-depreciation stands at 0.68. Cummins' 2026 CapEx plan of $1.35B to $1.45B represents ~3.7%-3.8% of consensus net sales ($37.67B) and outpaces trailing depreciation ($563M in 1H 2026), driven by 20 GW of flexible capacity investments across plants and supply chains through 2030.15
The cyclical bull phase is powered by an unprecedented intersection of generative AI data center buildouts requiring utility-scale backup gensets, tight industrial power equipment capacity, and regulatory prebuy activity across North American heavy-duty trucking ahead of EPA MY2027 mandates. In this phase, Power Systems EBITDA margins expand toward 25.75% and consolidated revenue reaches $41.34B in FY2027.
A cyclical downturn would emerge from the post-regulatory prebuy hangover in North American commercial trucks in 2027, compounded by warranty expense spikes on newly ramped X10 and X15 platforms and elevated capital expenditures of $1.35B-$1.45B. Under this scenario, factory overhead under-absorption would compress operating margins toward 10.5% and de-rate valuation multiples toward 12.0x.
Cummins occupies an advantaged position in heavy industrial machinery, balancing cyclical on-highway truck exposure ($10.88B FY2025 Engine revenue) with high-margin secular growth in Power Systems ($7.46B FY2025 sales) and recurring aftermarket support via Distribution ($12.41B FY2025 sales). However, capacity constraints on large gensets and customer concentration with PACCAR (13% of sales) leave performance tied to commercial vehicle build rates.58
With Cummins trading at $542.21, reflecting -18.2% relative to our fair value midpoint of $443.65, no new capital allocation is warranted under our Reduce rating. Institutional portfolios should maintain an underweight stance and trim existing exposure.
Risk management centers on capital preservation given negative risk-reward asymmetry (-18.2% implied return to fair value midpoint of $443.65). Portfolio exposure should be actively reduced via staged profit-taking or tight trailing stops. Monitor customer concentration risks associated with PACCAR (13% of consolidated sales) and track quarterly warranty provisions in SEC Form 10-Q filings as initial EPA MY2027 engine shipments begin.
Current market valuation ($542.21) offers negative margin of safety (-18.2% implied return against our $443.65 fair value midpoint), leaving long-term value capital exposed to cyclical multiple de-rating.4
Near-term sentiment remains supported by record Q2 results and raised 2026 revenue guidance of 10%-13%, but upside is constrained by valuation multiples, warranting tight trailing stops.5
A growing quarterly dividend with an established track record of consecutive increases and a commitment to return operating cash flow to shareholders offer dividend stability, though capital preservation is challenged at $542.21.
We assign a Reduce rating to Cummins Inc. (CMI). At $542.21, the stock trades at an implied return of -18.2% relative to our fair value midpoint of $443.65. While Cummins exhibits outstanding operational execution in utility-scale data center backup power generation and aftermarket distribution cash flow, prevailing market pricing excessively extrapolates peak cyclical earnings while under-pricing impending 2027 commercial truck demand moderation and new emissions engine platform warranty costs.58
Institutional investors should reduce equity exposure and redeploy capital toward industrial compounders offering wider margins of safety.
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The records this analysis drew on, as they stood when it was run.
Not every cited input appears here: internal calculations and intermediate model outputs have no external record, and some citations could not be matched to one.
Introduction of new EPA Model Year 2027 engine platforms elevates warranty and product coverage costs above historical low 2% levels. Consolidated operating margin compresses below 10.5% of revenue over an 18-month timeline, extending the margin degradation recorded in 1H 2026 when company EBITDA margin declined from 18.1% to 16.5% against FY2025 EBIT of $4,025M, resulting in an estimated 21.8% fair value reduction.57
A broader cyclical industrial slowdown or prolonged supply bottlenecks in large-scale generator sets leads investors to de-rate Cummins' terminal multiple from forward P/E of 15.38x toward historical trough levels of 12.0x over a 24-month horizon. This multiple compression generates an estimated 18.2% reduction in fair value.45
Persistent macroeconomic inflation and higher interest rates push Cummins' cost of equity above 11.2% over a 12-month horizon, exceeding the strict cost of equity of 10.211% calculated from raw beta of 1.205 and 5.15% risk-free rate. This elevated discount rate leads to an estimated 15.4% fair value haircut.2
Unanticipated field reliability failures or cost escalation on newly ramped X10 and X15 engine architectures.
Aktuell:Running in the low 2% of sales range across the company
Alarm, wennConsolidated operating warranty accruals rising above 3.5% of sales, compressing EBIT margin below 10.5%
Cancellations or grid-connection delays in hyperscale data center standby power procurement, stalling segment EBITDA margin expansion.
Aktuell:15% to 25% revenue growth guided for 2026 with deliveries extended into 2H 2028
Alarm, wennPower Systems segment revenue growth slowing below 10% YoY
Broad-based Asian construction slowdown or market share losses within localized manufacturing joint ventures.
Aktuell:Approximately 15% revenue growth guided for 2026 including joint ventures
Alarm, wennChina market revenue growth turning negative (<0% YoY)
Global commodity equipment replacement cycle downturn curbing high-horsepower engine demand in Power Systems.
Aktuell:Guided down 5% to up 5% in 2026
Alarm, wennRevenue contraction exceeding 15% YoY in mining applications
| 3 to 5 years |
| Maintaining technological cost leadership and scale economies in fuel-agnostic engines, making in-house OEM powertrain development uneconomical for major partners like PACCAR.8 |
| Production bottlenecks and capacity constraints in 95-liter high-horsepower generator sets | low | 1 to 3 years | Executing a $1.35B to $1.45B capital expenditure program in 2026 to bring 20 GW of flexible capacity online through 2030.5 |
Under the moderate discount rate, 117 $ comes from forecast-period earnings and 382 $ from the long-term value, totaling 500 $.
Project EPS through the explicit advantage period, fade growth as competition catches up, and discount the full stream at cost of equity.
Apply a terminal P/E to the dated forward EPS path, then discount that future share value back to the analysis date.
Add depreciation to net income, subtract maintenance capex, divide by diluted shares, and apply a normalized valuation multiple.
Solve for the growth rate that makes the model value equal the report-date share price.
The modal Base scenario reflects management's updated 2026 guidance and consensus forward trajectory. Consolidated revenue expands 11.87% in FY2026 to $37.67B within the guided 10% to 13% range, reaching $41.34B in FY2027. Diluted EPS increases to $28.45 in FY2026 and $34.34 in FY2027. Operating margins expand to 12.8% in FY2026 and normalize at 13.5%, supported by Power Systems mix and steady Distribution aftermarket cash flow. Cash flows are discounted at the moderate Ke of 9.9414%, yielding the house fair value midpoint of $443.65.1258
Serves as Cummins' primary secular growth driver, with guided 15%-25% revenue growth and 25.0%-25.75% segment EBITDA margins.5
Platform launches risk elevating warranty expenses above historical baselines, threatening operating margin expansion targets.5
Represents an ongoing drag on consolidated earnings during the energy transition, requiring monitoring of capital discipline.
| $43.82B |
| $45.79B |
| $47.39B |
| Operating income | $4.82B | $5.46B | $5.92B | $6.18B | $6.40B |
| NOPAT | $3.56B | $4.03B | $4.37B | $4.57B | $4.73B |
| Residual cash after reinvestment policy | $2.14B | $2.42B | $2.62B | $2.74B | $2.84B |
| Revenue growth | 11.9% | 9.7% | 6.0% | 4.5% | 3.5% |
| Operating margin | 12.8% | 13.2% | 13.5% | 13.5% | 13.5% |
| Tax rate | 26.1% | 26.1% | 26.1% | 26.1% | 26.1% |
| Reinvestment rate | 40.0% | 40.0% | 40.0% | 40.0% | 40.0% |
| Terminal growth | 2.5% | 2.5% | 2.5% | 2.5% | 2.5% |
Distribution segment generated $12.41B in FY2025 sales and is guided to grow revenue 9%-14% with 13.5%-14.25% EBITDA margins in 2026.
Aftermarket parts and service demand insulates consolidated operating earnings against cyclical freight swings in original equipment truck manufacturing.
Accelera generated $460M in FY2025 sales, with 2026 sales guided at $350M-$400M and net losses guided at $260M-$290M.
Zero-emissions technology commercialization remains a persistent operational drag on enterprise profitability, requiring disciplined capital pacing.
2026 CapEx is guided to $1.35B-$1.45B, exceeding FY2025 CapEx of $1.24B to add 20 GW of flexible manufacturing capacity.
Elevated near-term capital intensity dampens free cash flow expansion until incremental genset capacity generates cash in 2027-2028.
| Marge |
|---|
| CMI | Cummins Inc. | $74.8B | 15.4x | 2.2x | 15.9x | 21.1% | — |
| EMR | Emerson Electric Co. | $91.4B | 22.4x | 4.9x | 16.9x | 12.8% | 26.9% |
| PH | Parker-Hannifin Corporation | $120.8B | 24.1x | 5.6x | 22.8x | 25.1% | 23.5% |
| AME | AMETEK Inc. | $57.4B | 26.2x | 7.3x | 23.7x | 14.6% | 26.2% |
| IR | Ingersoll Rand Inc. | $30.7B | 20.2x | 3.9x | 17.1x | 9.5% | 16.9% |
| Emerging Market Industrialization and Decentralized Power Resilience | positive | Infrastructure modernization and industrial power reliability investments across developing economies support demand, with Cummins guiding 2026 China revenues up ~15% and India up 2%, reinforcing a $9.68B non-US revenue foundation. |
| Power Systems Segment Revenue Growth Rate | Segment revenue growth falling below 10% YoY. | Reduce terminal multiple and growth assumptions in valuation models to reflect decelerating mix shift. |
| China Market Revenue Growth Trajectory | China revenue growth turning negative (<0% YoY). | Assess whether international joint venture income can continue to buffer domestic cyclicality. |
| Mining Segment Engine Revenue Growth | Revenue contraction exceeding 10% YoY. | Trim cyclical earnings expectations in off-highway Power Systems applications. |
