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).