Cummins' Path Forward: Analyst Highlights Impact of Emission Settlement And 2027 Market Dynamics
Portfolio Pulse from Shivani Kumaresan
Truist Securities analyst Jamie Cook initiated coverage on Cummins Inc (NYSE:CMI) with a Hold rating and a $303 price target. Cummins, a global diesel engine manufacturer, was recently fined $2 billion for emission issues related to Dodge Ram trucks. The fine impacts its capital allocation, directing free cash towards debt payment from the Meritor acquisition and rebuilding its balance sheet, rather than returning cash to shareholders. Despite this, Cummins is expected to see growth in 2025 and 2026 due to a pre-buy ahead of the 2027 emissions change for trucks. Cummins has also gained share in the medium-duty overseas market, potentially adding at least $2.50 in EPS Power. The $303 price target is based on 9X EV/EBITDA and 16X P/E multiple on 2025 estimates, discounted back. CMI shares dropped 2.66% to $263.07.
March 14, 2024 | 6:39 pm
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Cummins Inc was initiated with a Hold rating and a $303 price target by Truist Securities. The company faces a $2 billion fine for emission issues but is expected to see growth due to a pre-buy ahead of 2027 emissions changes and gains in the medium-duty overseas market.
The Hold rating and $303 price target reflect a balanced view of Cummins' challenges and growth prospects. The $2 billion fine impacts its short-term financial strategy, but anticipated growth due to the 2027 emissions changes and market share gains could support its stock price. The recent drop in share price indicates market reaction to the fine, but the analyst's coverage suggests potential for recovery.
CONFIDENCE 85
IMPORTANCE 90
RELEVANCE 100