CMI Cummins
A durable powertrain franchise, but transition risk and heroic implied growth overwhelm the current valuation.
The business
Cummins sells diesel and alternative-fuel engines, power-generation equipment, components, and aftermarket service. It earns recurring, higher-margin revenue from a large installed base, but the long-term transition away from conventional engines reduces predictability.
Quality gate · 73/100
Moat & management
| Moat | narrow moat |
| Source | scale |
| Trajectory | stable |
| Management | adequate |
Global manufacturing scale, trusted reliability, emissions expertise, and an extensive service network protect the installed base. Electrification threatens legacy powertrains, although heavy-duty and backup-power applications should transition slowly.
Debt and repurchases appear sensible, while the Atmus separation showed portfolio discipline. Heavy investment in multiple next-generation powertrains is necessary but may dilute returns.
Owner-earnings inputs
| Owner earnings (TTM) | 2.67B |
| Owner-earnings yield | 2.9% |
| Free-cash-flow yield | 2.9% |
| Growth used (normalized) | 6.0% |
| Market-implied growth (reverse DCF) | 24.7% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 10.0% |
Projected owner earnings
| Yr | Owner earnings | Growth | PV |
|---|---|---|---|
| 1 | 2.83B | 6.0% | 2.57B |
| 2 | 2.99B | 5.7% | 2.47B |
| 3 | 3.15B | 5.3% | 2.36B |
| 4 | 3.31B | 5.0% | 2.26B |
| 5 | 3.46B | 4.7% | 2.15B |
| 6 | 3.61B | 4.3% | 2.03B |
| 7 | 3.76B | 4.0% | 1.92B |
| 8 | 3.90B | 3.7% | 1.81B |
| 9 | 4.03B | 3.3% | 1.70B |
| 10 | 4.15B | 3.0% | 1.59B |
Key risks
- Electrification or alternative powertrains erode the legacy engine franchise
- Industrial cyclicality and stricter emissions regulation pressure earnings
- Large transition investments produce inadequate returns
Catalysts
- Data-center and grid demand expands power-generation earnings
- Aftermarket growth and operational efficiency improve cash conversion
Recent news
score · 8 articles
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- Cummins (CMI) Upgraded to Buy: Here's What You Should Know
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- Here's What to Expect From Cummins’ Next Earnings Report
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- Cummins (CMI) Could Be 11% Undervalued As It Lifts Its Dividend Again
⚠ maintenance capex ≈ min(capex, D&A), capped at FCF · Price pays for ~25%/yr owner-earnings growth over 10y (reverse DCF); model credits 6%. · Rich vs our conservative value, but a quality business is not a short — stance is WAIT for a better price, not sell.