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Valued at a market cap of $51.8 billion, Cummins Inc. (CMI) designs, manufactures, distributes, and services diesel and natural gas engines, electric and hybrid powertrains, and related components. The Columbus, Indiana-based company offers products to original equipment manufacturers (OEMs), distributors, and dealers through a network of company-owned and independent distributor facilities.
Companies valued at over $10 billion are typically classified as “large-cap stocks,” and Cummins fits the label perfectly. The company is the country's leading manufacturer of diesel and natural gas engines for power generation and industrial and automotive markets.
CMI is currently trading 4.6% below its 52-week high of $387.90, reached on Dec. 9. Shares of this specialty industrial machinery company gained 26.2% over the past three months, significantly outpacing the Industrial Select Sector SPDR Fund’s (XLI) 8.1% returns during the same time frame.
Moreover, in the longer term, CMI has rallied 54.5% on a YTD basis, significantly outperforming XLI’s 21.7% returns. Shares of CMI are up 57.3% over the past 52 weeks, massively outpacing XLI’s 26.1% gains over the same time frame.
To confirm its bullish trend, CMI has been trading above its 200-day moving average since late January and has remained above its 50-day moving average since mid-July.
On Nov. 5, shares of CMI jumped 8.9% after its better-than-expected Q3 earnings release. The company’s revenue of $8.46 billion increased marginally from the year-ago quarter and surpassed the Wall Street estimates of $8.31. A 180-bps expansion in the company’s EBITDA margin led to a 27.7% year-over-year growth in its adjusted EPS to $5.86 per share. The bottom line exceeded the forecasted figure by a massive 21%. The company also raised its full-year 2024 EBITDA guidance to 15.5%, which might have further bolstered investor confidence.
In the third quarter, Cummins started full production of the X15N natural gas engine at its Jamestown Engine Plant. Cummins X15N is the first 15-liter natural gas engine to be designed with the flexibility to perform across a range of heavy-duty applications, including line haul and vocational.
CMI’s outperformance becomes more evident when compared to its rival, PACCAR Inc (PCAR), which gained 18.3% over the past 52 weeks and 18.6% on a YTD basis.
As CMI outperformed its industry peers recently, analysts remain moderately optimistic about its prospects. The stock has a consensus rating of “Moderate Buy” from the 18 analysts covering it, and the mean price target of $377.53 suggests a slight 2% premium to its current levels.
