Cummins Inc. (CMI) | Investment Case

1. Company Snapshot

1.a. Company Description

Cummins Inc.designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components worldwide.It operates through five segments: Engine, Distribution, Components, Power Systems, and New Power.

The company offers diesel and natural gas-powered engines under the Cummins and other customer brands for the heavy and medium-duty truck, bus, recreational vehicle, light-duty automotive, construction, mining, marine, rail, oil and gas, defense, and agricultural markets; and offers new parts and services, as well as remanufactured parts and engines.It also provides power generation systems, high-horsepower engines, heavy and medium duty engines, application engineering services, custom-designed assemblies, retail and wholesale aftermarket parts, and in-shop and field-based repair services.In addition, the company offers emission solutions; turbochargers; air and fuel filters, fuel water separators, lube and hydraulic filters, coolants, fuel additives, and other filtration systems; and electronic control modules, sensors, and supporting software, as well as new, replacement, and remanufactured fuel systems.

Further, it provides automated transmissions; standby and prime power generators, controls, paralleling systems, and transfer switches, as well as A/C generator/alternator products under the Stamford and AVK brands; and electrified power systems with components and subsystems, including battery, fuel cell, and hydrogen production technologies.Additionally, it offers filtration, aftertreatment, controls systems, air handling systems, automated transmissions, electric power generation systems, and batteries.The company sells its products to original equipment manufacturers, distributors, dealers, and other customers.

The company was formerly known as Cummins Engine Company and changed its name to Cummins Inc.in 2001.Cummins Inc.

was founded in 1919 and is headquartered in Columbus, Indiana.

Show Full description

1.b. Last Insights on CMI

Cummins Inc.'s recent performance was driven by strong Q3 operating results, with revenue beating estimates at $8.3 billion, despite a 2% decline from the previous year. The company's Power Systems and Distribution segments saw profitable growth, fueled by rising demand for backup power for data centers. Effective cost management helped navigate the North American truck market decline. Additionally, the company's Q3 earnings beat estimates, with earnings per share of $5.59, surpassing the Zacks Consensus Estimate of $4.73. (Source: Zacks)

1.c. Company Highlights

Last Price	510.65
Change Percentage	-0.02%
Open	508.76
Previous Close	510.74
Market Cap ( Millions)	70304
Volume	1031194
Year High	515.64
Year Low	260.02
M A 50	447.27
M A 200	369.61

FCF Yield	3.24%
Dividend Yield	1.50%
ROE	23.69%
Debt / Equity	60.50%
Net Debt / EBIDTA	107.13%
Price To Book	5.83
Price Earnings Ratio	26.37
Price To FCF	30.86
Price To sales	2.09
EV / EBITDA	16.98

2. Cummins' Q3 2025 Earnings: A Tale of Two Economies

Cummins reported revenues of $8.3 billion for Q3 2025, a 2% decrease from the same period last year. EBITDA was $1.2 billion or 14.3% of sales, down from $1.4 billion or 16.4% a year ago. The company's EPS came in at $3.86, below analyst estimates of $4.83. The decline in revenues was primarily driven by weaker North America heavy and medium-duty truck demand, which was largely offset by continued strength in global power generation markets, higher light-duty truck volumes, and favorable pricing.

Publication Date: Nov -07

                                    📋 Highlights
                                    Q3 Sales Decline:
                                                Sales fell to $8.3B (-2% YoY) due to weaker North American truck demand, partially offset by strong global power generation and light-duty truck sales.
EBITDA Margin Compression:
                                                EBITDA dropped to $1.2B (14.3% of sales) from $1.4B (16.4%) YoY, driven by net tariff impacts and lower engine volumes.
International Growth:
                                                International revenue rose 2% YoY, with China up 16% ($1.7B) thanks to 50% higher truck demand despite unfavorable product mix.
Power Systems Strength:
                                                Power Systems revenue hit $2B (+18% YoY) with EBITDA at 22.9% of sales, fueled by data center demand and cost-effective capacity expansions.
Data Center Power Outlook:
                                                Revenue from data center power generation expected to grow 30-35% in 2025, supported by strong demand for backup and prime power solutions.

                                

Segment Performance

The Distribution segment saw revenues increase 7% from a year ago to a record $3.2 billion, with EBITDA also reaching a record 15.5% of sales. The Power Systems segment reported revenues of $2 billion, an 18% increase from a year ago, with EBITDA dollars reaching a record $457 million. As Mark Smith noted, "We delivered strong results in what can be best described as a tale of 2 economies, certainly here in the U.S."

Valuation Metrics

With a P/E Ratio of 23.9 and an EV/EBITDA of 15.5, Cummins' valuation appears to be reasonable, considering the company's expected revenue growth of 3.9% next year. The company's ROE of 23.69% and ROIC of 11.61% indicate a strong ability to generate returns on equity and invested capital.

Outlook

Cummins expects engine shipments to on-highway markets to decline by 15% in the fourth quarter compared to the third quarter. However, the company is optimistic about the future, driven by strong demand in power generation markets, particularly in data center applications. The company is also investing in capacity expansion and new products to take advantage of growth opportunities.

Challenges Ahead

Cummins faces challenges in the Engine business, including lower volumes and unfavorable impacts from tariffs. However, the company is working hard to mitigate costs and achieve better results. As Jennifer Rumsey stated, "We are working to flex down plants, which will have an impact in the fourth quarter."

3. NewsRoom

Associated Banc Corp Trims Stake in Cummins Inc. $CMI

Nov -25

Source: defenseworld.net

Here are Monday's Top Wall Street Analyst's Research Calls: Baidu, Carvana, Exact Sciences, Ferrari, Marvell Technology, Meta Platforms and More

Nov -24

Source: 247wallst.com

Market Today: Nvidia whipsaws, WBD draws bids, Lilly tops $1T

Nov -21

Source: gurufocus.com

First Look: AI selloff, jobs jitters, and big corporate shifts

Nov -21

Source: gurufocus.com

Cummins Up 9,261% Since First Outlier Institutional Inflow

Nov -12

Source: fxempire.com

Americana Partners LLC Has $1.30 Million Holdings in Cummins Inc. $CMI

Nov -11

Source: defenseworld.net

Allworth Financial LP Boosts Stake in Cummins Inc. $CMI

Nov -11

Source: defenseworld.net

Cummins Inc (CMI) Q3 2025 Earnings Call Highlights: Navigating Challenges with Strategic Growth

Nov -06

Source: gurufocus.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.94%)

6. Segments

Engine

Expected Growth: 2.5%

The engine segment growth of 2.5% is driven by increasing demand for clean energy solutions, Cummins' innovative products, and strategic acquisitions. The company's strong position in the commercial vehicle market, expanding presence in emerging markets, and growing adoption of electric and hybrid vehicles contribute to its growth momentum.

Components

Expected Growth: 3.2%

Cummins Inc.'s growth of 3.2 is driven by increasing demand for emission-reducing technologies, expansion into new markets, and investments in electrification and digitalization. Strong performance in the Asia-Pacific region and growth in Power Generation and Heavy-Duty segments also contribute to the company's growth.

Distribution

Expected Growth: 3.5%

Cummins' distribution growth of 3.5% is driven by increased demand for diesel engines, expansion into emerging markets, and strategic partnerships. The company's diversified product portfolio and strong presence in the North American market also contribute to its growth. Additionally, Cummins' focus on innovation and sustainability supports its long-term growth prospects.

Power Systems

Expected Growth: 4.0%

The Power Systems segment growth from Cummins Inc. is driven by increasing demand for reliable and efficient power generation solutions, expansion into emerging markets, and a strong product portfolio. Additionally, the company's investments in technology and innovation, such as electrification and digitalization, are expected to fuel growth. Cummins' strategic acquisitions and partnerships also contribute to the segment's 4.0% growth.

Accelera

Expected Growth: 5.0%

Accelera's growth is driven by increasing demand for clean energy solutions, government regulations supporting alternative fuels, and Cummins' strategic expansion into new markets. The 5.0 growth rate reflects the segment's strong position in the hydrogen and fuel cell market, with investments in technology and partnerships driving innovation and adoption.

Intersegment Eliminations

Expected Growth: 0.0%

Intersegment eliminations from Cummins Inc. show 0.0% growth, indicating no change in inter-segment transactions or pricing. This stability suggests that the company's business segments are maintaining consistent relationships, with no significant shifts in product flows or pricing strategies between segments.

7. Detailed Products

Engines

Cummins offers a wide range of diesel and natural gas engines for various applications, including on-highway and off-highway use. These engines are designed to provide high performance, reliability, and fuel efficiency.

Generator Sets

Cummins generator sets are designed to provide reliable and efficient power generation for various applications, including emergency backup power, prime power, and peak shaving.

Power Systems

Cummins power systems include a range of products such as uninterruptible power supplies (UPS), switchgear, and controls. These systems are designed to provide reliable and efficient power distribution and control.

Filtration Products

Cummins filtration products include a range of air, fuel, and lube filtration systems designed to improve engine performance and reduce emissions.

Emissions Solutions

Cummins emissions solutions include a range of products and services designed to help customers meet emissions regulations, including exhaust gas recirculation (EGR) systems, selective catalytic reduction (SCR) systems, and diesel particulate filters (DPFs).

Services

Cummins offers a range of services, including maintenance, repair, and overhaul (MRO) services, as well as training and technical support.

8. Cummins Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Cummins Inc. operates in the engine and generator industry, where substitutes such as electric vehicles and alternative energy sources are emerging. However, the demand for internal combustion engines remains strong, particularly in developing markets and for specific applications like heavy-duty trucks and construction equipment. The threat of substitutes is moderate as alternative technologies are still developing and face infrastructure and cost challenges.

Bargaining Power Of Customers

Cummins Inc. has a diversified customer base across various industries, including trucking, construction, and power generation. While some large customers may have negotiating power, the company's broad product portfolio and strong brand reputation limit the bargaining power of individual customers. Additionally, switching costs for customers are high due to the complex nature of Cummins' products.

Bargaining Power Of Suppliers

Cummins Inc. relies on a network of suppliers for components and raw materials. While some suppliers may have significant negotiating power, particularly those providing specialized components, Cummins' scale and purchasing volume allow it to maintain a relatively balanced relationship with suppliers. The company also has a strategy to develop and source components internally, which helps to mitigate supplier bargaining power.

Threat Of New Entrants

The engine and generator industry has high barriers to entry, including significant investment requirements for research and development, manufacturing capacity, and regulatory compliance. New entrants would also face challenges in establishing a brand reputation and securing distribution networks. As a result, the threat of new entrants is relatively low.

Intensity Of Rivalry

The engine and generator industry is highly competitive, with several major players, including Caterpillar, Deere & Company, and Volvo. Competition is driven by factors such as product performance, pricing, and innovation. The high level of competition results in significant marketing and research and development expenses for industry participants.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	42.52%
Debt Cost	5.87%
Equity Weight	57.48%
Equity Cost	9.26%
WACC	7.82%
Leverage	73.98%

11. Quality Control: Cummins Inc. passed 4 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Cummins

A-Score: 5.9/10

Value: 3.5

Growth: 5.7

Quality: 5.6

Yield: 4.0

Momentum: 8.0

Volatility: 8.7

1-Year Total Return ->

AMETEK

A-Score: 5.4/10

Value: 1.7

Growth: 6.1

Quality: 8.1

Yield: 1.0

Momentum: 6.0

Volatility: 9.3

1-Year Total Return ->

Emerson Electric

A-Score: 5.3/10

Value: 2.4

Growth: 3.1

Quality: 6.5

Yield: 4.0

Momentum: 7.0

Volatility: 8.7

1-Year Total Return ->

Dover

A-Score: 4.9/10

Value: 3.7

Growth: 4.9

Quality: 7.4

Yield: 2.0

Momentum: 3.0

Volatility: 8.7

1-Year Total Return ->

Otis

A-Score: 4.9/10

Value: 4.4

Growth: 4.4

Quality: 5.7

Yield: 3.0

Momentum: 3.0

Volatility: 9.0

1-Year Total Return ->

Ingersoll Rand

A-Score: 4.3/10

Value: 1.8

Growth: 7.6

Quality: 6.6

Yield: 0.0

Momentum: 2.5

Volatility: 7.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

17.31%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

7.82%

Cummins Inc. - US2310211063

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on CMI

1.c. Company Highlights

Higher Yield

Less Volatile

Stable Momentum

Average Yield

Fairly Valued

Earnings Beats

Revenues Beats

Strong Momentum

Medium Volatility

2. Cummins' Q3 2025 Earnings: A Tale of Two Economies

Segment Performance

Valuation Metrics

Outlook

Challenges Ahead

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.94%)

6. Segments

Engine

Expected Growth: 2.5%

Components

Expected Growth: 3.2%

Distribution

Expected Growth: 3.5%

Power Systems

Expected Growth: 4.0%

Accelera

Expected Growth: 5.0%

Intersegment Eliminations

Expected Growth: 0.0%

7. Detailed Products

Engines

Generator Sets

Power Systems

Filtration Products

Emissions Solutions

Services

8. Cummins Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Cummins Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

510.65$

Current Price

510.65$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA