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Columbus, Indiana-based Cummins Inc. (CMI) designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components worldwide. Valued at $50.9 billion by market cap, the company offers products to original equipment manufacturers (OEMs), distributors, and dealers through a network of company-owned and independent distributor facilities.
Shares of the global power solutions leader have outperformed the broader market considerably over the past year. CMI has gained 65.3% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 31.8%. In 2024, CMI stock is up 54.9%, surpassing the SPX’s 25.8% rise on a YTD basis.
Zooming in further, CMI’s outperformance is also apparent compared to the Industrial Select Sector SPDR Fund (XLI). The exchange-traded fund has gained about 35.4% over the past year. Moreover, CMI’s returns on a YTD basis outshine the ETF’s 25.6% gains over the same time frame.
One of the key factors driving CMI’s strong performance is the improvement in its Power Systems and Distribution businesses. Cummins recently commenced full production of the X15N natural gas engine at its Jamestown Engine Plant, supporting various fuel options like natural gas, advanced diesel, and hydrogen, marking a significant milestone as the plant celebrated its 50th anniversary during Q3.
On Nov. 5, CMI shares closed up more than 8% after reporting its Q3 results. Its EPS of $5.86 beat Wall Street expectations of $4.84. The company’s revenue was $8.5 billion, beating Wall Street forecasts of $8.3 billion.
For the current fiscal year, ending in December, analysts expect CMI’s EPS to grow 5.4% to $20.75 on a diluted basis. The company’s earnings surprise history is mixed. It beat the consensus estimate in two of the last four quarters while missing the forecast on two other occasions.
Among the 18 analysts covering CMI stock, the consensus is a “Moderate Buy.” That’s based on five “Strong Buy” ratings, one “Moderate Buy,” 10 “Holds,” one “Moderate Sell,” and one “Strong Sell.”
The configuration is consistent over the past three months.
On Nov. 20, Citigroup Inc. (C) analyst Kyle Menges kept a “Buy” rating and raised the price target on CMI to $415, implying a potential upside of 11.9% from current levels.
The mean price target of $371.53 represents a marginal premium to CMI’s current price levels. The Street-high price target of $436 suggests an upside potential of 17.5%.
