Analyst Note| Dawit Woldemariam |
Cummins’ third-quarter results showed continued pressure from supply chain constraints. The company’s operations were affected by cost inflation, as material and freight costs continued to pressure margins. Management reduced its 2021 guidance to reflect these near-term supply chain headwinds. The company expects its top line to grow approximately 20%, which is at the lower bound of management’s previous guidance of 20%-24%. In addition, Cummins expects consolidated EBITDA margins to come in at roughly 15% to close out the year. Even so, the time value of money since our last update offset our lower revenue and margin expectations. We raised our fair value estimate by $1 to $231.