Why This Cummins Analyst Is Downshifting On The Stock

Cummins Inc. CMI has been in focus amid a record-breaking penalty and recalls of Ram Trucks.

Although the company has a healthy balance sheet and the position of a market leader, the consensus earnings expectations appear high, according to BofA Securities.

The Cummins Analyst: Michael Feniger downgraded the rating for Cummins from Neutral to Underperform, while reducing the price target from $243 to $225.

The Cummins Thesis: While the consensus estimates suggest flat-like earnings in 2024, North American truck production is likely to decline by double-digits in the year, Feniger said in the downgrade note.

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“ACT expects NA truck production to fall 20% to 272k units in ’24,” the analyst wrote. “While the ’24 downturn is likely less severe vs prior downturns and we expect a recovery to play out in ‘25, weak trends are not exactly out of the woods (trucker capex, used equipment values),” he added.

“While we are skeptical on EV adoption rates (positive for CMI’s legacy business), CMI is investing heavily in its platform to prepare for rising regulatory environment,” Feniger further stated. He added that rising uncertainty weighs on Cummins’ hydrogen opportunity.

CMI Price Action: Shares of Cummins had declined by 2.12% to $228.12 at the time of publication Friday.

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