QS Research · Michael Burry's Scion Capital analyst template · 2006
CUMMINS INC (CMI)
As of 2026-11-06 · 11/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction medium · base case +22% · downside -12% · upside +33%
At $450.07 the market is paying 11.4x TTM EV/EBITDA and 18.6x TTM P/E for a business that just printed a record 18.9% quarterly EBITDA margin and $3.46B TTM free cash flow, so the 39% drawdown looks like a cyclical pickup-truck air-pocket rather than a broken franchise (N1,N26,N28,N18). On section 13's TTM base of $5.62B EBITDA, ~$2.61B net debt and 137.08M shares, my base multiple is PCAR's 13.9x: $78.1B EV less $2.61B net debt = $75.5B equity, or ~$551/share, +22.4%; DCI's 15.1x gives ~$600, +33.3%, and ALSN's 16.4x P/E on $3.32B TTM net income gives ~$397, -11.8% (S1,N14,N24,N9,N5,N1,N15). The downside is thin because the stock already sits at the peer floor, but the base case is not +30%, so this is a watch, not a long. The key test is whether North American pickup demand is truly temporary; if it is, the power-generation mix and cash return should drive the re-rate.
Key numbers
- Share price: $450.07
- Market cap: $61.69B
- Latest financial period: FY Dec 2025 to Sep 30, 2026
- Revenue (FY Dec 2025): $33.67B
- EV / EBITDA (TTM): 11.4x
- P/E (TTM): 18.6x
- Price / book: 4.63x
The 15 boxes
- ✓ 1. Long-form business notes
Cummins sells diesel, natural gas and gasoline engines plus the parts, aftertreatment, drivetrain, generators and service that surround them through five segments (Engine, Components, Distribution, Power Systems, Accelera), and it earns a rising share of profit from distribution, service and power generation rather than from engine hardware alone. Consolidated revenue went from $19.81B in FY2020 to $34.10B in FY2024 and $33.67B in FY2025, with operating income of $4.03B in FY2025 versus $1.76B in FY2023, a year depressed by the $2.0B emissions settlement charge rather than by weak operations. Between the FY2020 and FY2025 filings the portfolio was reshaped: filtration (Atmus) was split off in March 2024 with a ~$1.3B gain, the New Power segment became Accelera, and the electrolyzer business was impaired and put into wind-down in 2025. FY2024 net income of $3.95B and pre-tax income of $4.90B versus operating income of $3.75B contain one-off items and should not be read as operating profitability.
- ○ 2. Competitive advantage
Sources support a mixed but real competitive advantage: OEMs that make their own engines still outsource certain engine production to Cummins for product quality and emission-compliance capability, and FY2025 revenue was $33.67B with $8.52B gross profit and $4.03B operating income. But the 10-K flags that customers could in-source, emissions compliance is costly and litigious, and nearly half of FY2025 investee income came from China JVs Cummins does not unilaterally control. The sources do not name specific competitors or give market share.
- ✓ 3. 10-Q takeaways
Q3 2026 (three months ended 2026-09-30) net sales rose 13% to $9,438M and operating income rose 69% to $1,444M, with gross margin 27.7% vs 25.6%; growth was led by Components, Engine and Power Systems. The quarter’s $1,140M net income and $8.25 diluted EPS were helped by the absence of Q3 2025 Accelera impairment/write-down charges, while 9M 2026 included a $199M low-pressure fuel-cell net charge. Cash from operations was $3.2B for 9M 2026, cash and marketable securities were $4.2B, and the company repurchased $833M of stock in 9M 2026. Management guided to a ~23.0% 2026 effective tax rate excluding discrete items and said net tariff impact was immaterial to 9M profitability/cash flow, but flagged continued tariff risk.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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