Cummins Inc. "More upside for Power, supportive truck outlook: Upgrade to Buy"

Research evidence excerpt

Cummins Inc. "More upside for Power, supportive truck outlook: Upgrade to Buy"

Q2E 6.12 7.21 18 7.29

Consensus reflects 28% and 20% EBITDA growth for these segments, Q3E 6.90 8.10 17 7.78

respectively. Our estimates reflect incremental margins in-line with prior cycles; Q4E 7.68 8.45 10 7.86

faster revenue growth, especially in Distribution, drives our estimates ahead of 12/26E 25.65 29.90 17 29.33

consensus. 12/27E 30.60 35.35 16 33.89

12/28E 36.50 41.25 13 39.76

We think further upside could come from oil & gas and mining, where we also see

strong/improving momentum, as well as prime power opportunities later in the Steven Fisher, CFA

decade. Analyst

steven.fisher@ubs.com

Improvements in the truck market reduce downside risk +1-212-713 8634

While pre-buying ahead of tighter emissions regulations is driving strong truck demand Avinatan Jaroslawicz

for 2H26, we also believe underlying demand is improving as well. We see a flattish NA Analyst

avinatan.jaroslawicz@ubs.com

truck market in 2027, and expect demand in 2028 to be better than 2026-27 (~300k vs

+1-212-713 1405

270-275k units for HD).

Judah Aronovitz

The tighter emissions regulations will also require a full rollout of new MD/HDT Associate Analyst

engines with more content. This drives $8-10k of new content per truck, mostly judah.aronovitz@ubs.com

related to Cummins' engine and emissions control products. +1-212-713-4881

We expect engine EBITDA to be 14% higher in 2028E vs 2026E, and expect 19%

growth for Components segment EBITDA. Our 2028 ests are more cautious than

Highlights (US$m) 12/23 12/24 12/25 12/26E 12/27E 12/28E 12/29E 12/30E

Revenues 34,065 34,102 33,670 37,504 39,963 43,277 45,470 46,215

EBIT (UBS) 3,523 4,316 4,750 5,832 6,732 7,712 8,392 8,625