Wells Fargo Industrials & Materials Conference: Top 5 Themes (Day 1)

Research evidence excerpt

Wells Fargo Industrials & Materials Conference: Top 5 Themes (Day 1)

Industry Update Equity Research

Cummins (CMI)

(i) CMI's newly announced 4MW natural gas prime power engine shares ~80% of its architecture

with the company's existing 95L standby product. Leveraging that common platform accelerates

the development timeline, with a key development milestone in 2H27, pilot launch in 2H28, and

production ramping through 2029 and 2030.

(ii) Management noted the announced expansion will sit within the existing walls of CMI's facilities

—enabling a fast payback—at a cost of roughly ~$20M per GW, consistent with the prior expansion.

The added capacity is expected to ramp fairly linearly from 2027 to 2030, with a step-up in 2028, and

supports the 60L, 78L, and 95L engine platforms.

(iii) Management noted it is seeing strong demand and is booking orders through 2028 for the

incremental announced capacity expansion. There has been no significant shift in the backlog and no

wave of customer cancellations. Cancellations carry penalties.

(iv) CMI noted a preference among North America customers for the larger 95L units, while China is

still using 60L engines, given its existing capacity base. Management indicated China could eventually

migrate to larger units.

(v) Management noted it expects EPA27 clarity in the coming weeks. Management noted it expects a

EPA27 prebuy of 10k-20k HD units, with the prebuy potentially limited by supply constraints.

(vi) Engine margins are expected to improve as warranty accruals moderate. Engines will have higher

ASP from additional EPA27 content.

AGCO Corporation (AGCO)

(i) AGCO is progressing on its Fendt growth strategy. Fendt dealerships are expanding into white

space, targeting low- to mid-90s coverage vs. ~80% today.