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Cummins Inc CMI

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Morningstar’s Analysis

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Cummins Reports Strong Q2 Sales and Margin Growth; Freight Demand Remains Robust

Dawit Woldemariam Equity Analyst

Analyst Note

| Dawit Woldemariam |

Cummins reported second-quarter results in line with our expectations. We raised our fair value estimate to $230 per share from $228 due to the time value of money, slightly offset by the impact of Morningstar’s probability-adjusted U.S. corporate tax rate assumption of 26% starting in 2022. The company’s top line grew 59% year on year, largely due to strong performance from the engine business. Strong freight demand continues to boost engine sales in new trucks and construction machinery. Engine EBITDA margins also expanded in the quarter thanks to improved volume, up over 70 basis points from prepandemic levels (second quarter of 2019).

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Company Profile

Business Description

Cummins is a leading manufacturer of diesel engines used in commercial trucks, off-highway equipment, and railroad locomotives, in addition to standby and prime power generators. The company also sells powertrain components, which include filtration products, transmissions, turbochargers, aftertreatment systems, and fuel systems. Cummins is in the unique position of competing with its primary customers, heavy-duty truck manufacturers, who make and aggressively market their own engines. Despite robust competition across all its segments and increasing government regulation of diesel emissions, Cummins has maintained its leadership position in the industry.

500 Jackson Street, Box 3005
Columbus, IN, 47202-3005
T +1 812 377-5000
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 57,825