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Cummins Inc CMI

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Cummins’ Q3 Results Affected by Supply Chain Constraints, Leading Management to Lower 2021 Guidance

Dawit Woldemariam Equity Analyst

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.

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Company Profile

Business Description

Cummins is a leading manufacturer of diesel engines used in commercial trucks, off-highway equipment, and railroad locomotives, in addition to standby and prime power generators. The company also sells powertrain components, which include filtration products, transmissions, turbochargers, aftertreatment systems, and fuel systems. Cummins is in the unique position of competing with its primary customers, heavy-duty truck manufacturers, who make and aggressively market their own engines. Despite robust competition across all its segments and increasing government regulation of diesel emissions, Cummins has maintained its leadership position in the industry.

500 Jackson Street, Box 3005
Columbus, IN, 47202-3005
T +1 812 377-5000
Sector Industrials
Industry Specialty Industrial Machinery
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 57,825