Cummins stock price forecast: firing on all cylinders

By:
on Mar 29, 2024
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  • Cummins share price has surged to a record high, giving it a market cap of over $40 billion.
  • Other industrial companies like Emmerson Electric and Illinois Tool Works have also jumped.
  • The company is still highly undervalued compared to peers.

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Cummins (NYSE: CMI) stock price has silently surged to a record high, joining other industrial giants like Emerson Electric, Rolls-Royce, and Illinois Tool Works. It has jumped for three straight weeks, reaching a record high of $295. It is up by 88% in the past five years and by 22% this year.

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Business is still growing

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Cummins is one of the biggest industrial giants in the United States. The company manufactures various products, including automated transmissions, axles and brakes, automotive engines, and power generation engines.

Most Americans have used products made by Cummins. For example, it is one of the top suppliers for companies like PACCAR, Ford, Isuzu, and Volkswagen. The company also has joint ventures with firms like Tata, Komatsu, and Dongfeng.

Most of Cummin’s business comes from its components business followed by its engine and distribution segment. The other notable sectors are power systems and Accera.

Cummins’s business is doing well, helped by strong local and international demand. Its annual revenue has increased from over $23 billion in 2019 to more than $34 billion in 2023. Some of this revenue growth is mostly because of acquisitions. It acquired Meritor in a $3.7 billion deal in 2022.

Analysts believe that Cummins has more room to grow. According to Yahoo Finance, the average revenue estimate for this year will be about $33 billion followed by $34.62 billion in 2025. This slowdown will be because of its decision to split its remaining Atmus business. It also expects that the American truck engine business will moderate this year. The CFO said:

“We do expect moderation in several of our key markets in 2024, especially in the US truck market as reflected in our guidance. We have already taken actions to reduce costs in the business and are in a good situation to navigate the economic cycle.”

Cummins is still an undervalued company. It has a trailing PE multiple of 14.95, lower than the sector median of 20.3. Its forward PE ratio stands at 16, also lower than the sector median of 19.2. Most importantly, its PEG ratio of 0.67 is also lower than the sector median of 1.78.

Cummins stock price forecast

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CMI chart by TradingView

The weekly chart shows that the CMI share price has been in a strong bullish trend in the past few months. It has recently flipped the important resistance point at $259.91, its highest point in September last year. Flipping that level was important since it was the upper side of the ascending triangle pattern.

Cummins share price has remained above the 50-week and 25-week moving averages. The Average Directional Index (ADX) has moved to 33, meaning that it is in a strong trend. The MACD indicator has continued rising.

Therefore, I suspect that the stock will pull back and retest the support at $260 and then resume the bullish trend.

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