康明斯：催化路径正在形成，但取决于动力系统

Chad Dillard+1 917 344 8469chad.dillard@bernsteinsg.com Miguel Marques, CFA+1 917 344 8432miguel.marques@bernsteinsg.com RatingMarket-Perform Specialist Sales Steve Song+1 917 344 8401steve.song@bernsteinsg.com Price Target CMI 700.00 USD(600.00OLD) Cummins: The catalyst path is shaping up, but it hangs on Power CMI finished up 3% after delivering a 9% EPS beat and an across-the-board guidance raise.There is lots to like about the set-up here: core Engine is bouncing off the trough, Distributionguide still looks conservative, Power Systems remains strong, and Accelera loses improvedconsiderably. With an investor day later this month, the catalyst path is setting up favorably: Close Date5 May 2026CMI Close Price (USD)674.88Price Target (USD)700.00Upside/(Downside)4%52-Week Range689.35/290.73SPX7,259.22FYEDecDiv Yield1.2%Market Cap (USD) (M)93,307EV (USD) (M)98,832 Mgmt raises its Engine guide.Revenue growth expectations were raised by 350bps to+9.5% Y/Y growth implying ~$12B in FY sales and ~$9.2B in sales from 2Q-4Q, which is7% above street’s expectation. The EBITDA margin guide was raised by 25bps to 13%,which implies 30% incrementals from 2Q-4Q (vs. mid-teens for FY). Despite also raising theindustry guide for the N. American heavy and medium-duty to 10% and 20% growth, (up500bps each), mgmt is embedding a “modest” pre-buy in 2H as supply chain ramps. Mgmtadded a third shift in a key mftg site to meet demand that could drive further upside. Power Systems offers further strength to the data center thesis.Following last quarter’s less production days and weaker aftermarket mix, Power Systems quietedconcerns putting up 19% growth (28% growth in Power Generation, up from 14% in 4Q)and ~24% EBITDA margins (excluding one-time tariff rebates and supplier recoveries). Mgmtalso raised its FY revenue growth and EBITDA margin guide by 100bps to 16.5% growth and25.5% margins. More importantly, mgmt stated its intention to “raise capacity to meet evenstronger demand” that will be further discussed at its investor day late this month. This isafter CAT’s large reciprocating engine capacity raise by 3x vs. ‘24 levels (up from 2x), thoughit interestingly didn't include standby products where CMI’s portfolio is focused. An interesting catalyst path shaping up ahead of May 21st.The inflection in its coreEngine business is underway, elevated NOx-related investments are coming off the bookslater this year, EPA27 is driving higher Engine content (and price), Accelera cost actions arealready easing (potential spin/sale in the works), and an incoming Power announcementmakes this a table stakes event - the hint at another organic initiative sounds interesting,we just wonder at which point capacity will be available. Could positive tone from mgmt ontoday’s call suggest prime power entry sooner than later? Investment Implications DETAILS APPENDIX - FINANCIAL FORECASTS BERNSTEIN TICKER TABLE I. REQUIRED DISCLOSURES References to "Bernstein" or the “Firm” in these disclosures relate to the following entities: Bernstein Institutional Services LLC(April 1, 2024 onwards), Sanford C. Bernstein & Co., LLC (pre April 1, 2024), Bernstein Autonomous LLP, BSG France S.A. (April 1,2024 onwards), Sanford C. Bernstein (Hong Kong) Limited盛博香港有限公司,Sanford C. Bernstein (Canada) Limited, SanfordC. Bernstein (India) Private Limited (SEBI registration no. INH000006378), Sanford C. Bernstein (Singapore) Private Limited,Sanford C. Bernstein Japan KK(サンフォード・C・バーンスタイン株式会社)and analysts employed by Société GénéraleAfrica Technologies & Services to produce Bernstein research under a Global Services Agreement in place between Bernsteinand Société Générale. Bernstein is part of a joint venture between Société Générale (SG) and AllianceBernstein, L.P. (AB). Unless specifically notedotherwise, for purposes of these disclosures, references to Bernstein’s “affiliates” relate to both SG and AB and their respectiveaffiliates. VALUATION METHODOLOGY Cummins Inc Our $700 price target is based on a 22x P/E multiple to our 2027 EPS, which we believe is appropriate given (1) our SoTPframework that is separately values its structural Power Systems business and cyclical RemainCo business, (2) where we are inthe current cycle, (3) relative valuation vs. the S&P 500 index, and (4) the company’s respective market/portfolio positioning. RISKS Cummins Inc Upside/Downside risks include the following: 1) a better/worse than expected cyclical recovery; 2) higher/lower market sharegains/losses; 3) higher/lower component intensity; 4) better/worse cost structure management; 5) more/less aggressivedeployment of balance sheet. RATINGS DEFINITIONS, BENCHMARKS AND DISTRIBUTION EQUITY RATINGS DEFINITIONS Bernstein brand The Bernstein brand rates stocks based on forecasts of relative performance for the next 12 months versus the S&P 500 forstocks listed on the U.S. and Canadian exchanges, versus the Bloomberg Europe Developed Markets Large and Mid Cap PriceRe