Cummins (CMI) Stock Forecast & Price Target

Cummins reported a robust sales performance, with Power Systems sales rising 18% to $1.996 billion, exceeding market expectations due to heightened demand in power generation, notably for data center applications. The Distribution segment also performed well, with a 7.5% increase in sales to $3.172 billion, driven by strong demand for power generation products in North America. Additionally, gross margins improved by 30 basis points year-over-year to 26.0%, reflecting operational efficiency, while joint venture income increased to $104 million, supported by strong sales growth in China.

Cummins reported an adjusted EBITDA of $292 million, slightly exceeding expectations but reflecting a decline in the adjusted EBITDA margin to 12.5%, due in part to weakened North American on-highway demand. The company is grappling with significant pressures, as evidenced by a 27% quarter-over-quarter decrease in US heavy and medium-duty shipments, alongside ongoing contraction in the Chinese commercial vehicle market, which has persisted since 2018. Furthermore, projected unit shipments indicate a continued decline of approximately 15% through the end of the year, compounded by a substantial $200 million non-cash goodwill impairment that adversely affected other income.