CUMMINS INC (CMI) Stock Analysis
CUMMINS INC (CMI) Stock Analysis
Analysis from 10-Q filed 2025-11-06. Data as of Q4 2025.
Overall Grade: F (Concerning)
CUMMINS INC faces challenges in financial performance that warrant careful analysis.
| Metric | Value | Context |
|---|---|---|
| ROIC | 15.9% | Solid returns |
| FCF Margin | 7.1% | Healthy cash flow |
| Debt/Equity | 0.6x | Moderate leverage |
Investment Thesis: Strong return on invested capital of 15.9% suggests durable competitive advantages and efficient capital allocation.
Explore CUMMINS INC: Earnings History | Filing Intelligence | ROIC Analysis
Profitability: CUMMINS INC earns 15.9% ROIC, Top 25% in Industrials
CUMMINS INC's trailing-twelve-month ROIC of 15.9% ranks Top 25% in Industrials companies (sector median: 7.3%), driven by NOPAT margin of 8.9% combined with asset turnover of 1.0x. Source: 10-Q filed 2025-11-06. Gross margin of 25.3% with operating margin at 12.0% reflects a competitive pricing environment.
| Metric | CMI | Rating | Context |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 15.9% | Good | Above sector median of 7.3% |
| Return on Equity (ROE) | 24.7% | Excellent | Efficient use of shareholder equity |
| Gross Margin | 25.3% | Adequate | Competitive pricing environment |
| Operating Margin | 12.0% | Good | Moderate operational efficiency |
Cash Flow: CUMMINS INC generates $2.4B FCF at 7.1% margin, positive NaN/8 quarters
CUMMINS INC generated $2.4B in free cash flow (TTM), a 7.1% FCF margin, a margin that ranks Top 50% in Industrials. Operating cash flow exceeds net income by 1.3x, indicating high earnings quality. FCF was positive in N/A of the last 8 quarters. Source: 10-Q filed 2025-11-06.
| Metric | CMI | Rating | Context |
|---|---|---|---|
| Free Cash Flow Margin | 7.1% | Adequate | Healthy cash generation |
| Free Cash Flow (TTM) | $2.4B | Good | Positive cash generation |
| OCF/Net Income | 1.3x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
Balance Sheet: CUMMINS INC at 0.6x leverage
CUMMINS INC's debt-to-equity ratio of 0.6x reflects moderate leverage. Total debt of $7.2B offset by $3.6B in cash. Source: 10-Q filed 2025-11-06.
| Metric | CMI | Rating | Context |
|---|---|---|---|
| Debt to Equity | 0.6x | Good | Moderate leverage |
| Net Cash Position | $-3.6B | Warning | Net debt position |
Valuation: CUMMINS INC trades at 24.8x earnings
CUMMINS INC trades at a P/E of 24.8x. Free cash flow yield of 3.4% reflects market expectations for growth.
| Metric | CMI | Rating | Context |
|---|---|---|---|
| P/E Ratio | 24.8x | Adequate | Premium valuation |
| EV/Sales | 2.2x | Good | Attractive revenue multiple |
| FCF Yield | 3.4% | Adequate | Lower cash yield |
| Dividend Yield | 1.5% | Adequate | Growth focus over income |
Capital Allocation: CUMMINS INC returns 1.5% shareholder yield
CUMMINS INC's total shareholder yield is 1.5% (dividends 1.5% + buybacks). Source: 10-Q filed 2025-11-06.
| Metric | CMI | Rating | Context |
|---|---|---|---|
| Total Shareholder Yield | 1.5% | Adequate | Dividend + buyback yield combined |
| Total Capital Returned (TTM) | $1.1B | Good | Dividends + buybacks returned to shareholders |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 15.9% | Top 25% | 2.2x above |
| Free Cash Flow Margin | 7.1% | Top 50% | 1.5x above |
| Gross Margin | 25.3% | Bottom 50% | 0.8x below |
| Operating Margin | 12.0% | Top 50% | 1.6x above |
| Return on Equity (ROE) | 24.7% | Top 25% | 2.9x above |
| P/E Ratio | 24.8x | N/A | - |
Financial Scorecard
| Metric | CMI | Rating | Sector Context |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 15.9% | Good | Top 25% of sector (median: 7.3%) |
| Free Cash Flow Margin | 7.1% | Adequate | Top 50% of sector (median: 4.7%) |
| Gross Margin | 25.3% | Adequate | Bottom 50% of sector (median: 33.1%) |
| Debt to Equity Ratio | 58.6% | Good | Moderate leverage |
| P/E Ratio (Price-to-Earnings) | 24.8x | Adequate | Fair value |
| Free Cash Flow Yield | 3.4% | Adequate | Moderate yield |
Frequently Asked Questions
Q: What is CUMMINS INC's Return on Invested Capital (ROIC)?
CUMMINS INC (CMI) has a trailing twelve-month Return on Invested Capital (ROIC) of 15.9%. This compares above the sector median of 7.3%. An ROIC between 12-20% indicates solid capital allocation and sustainable competitive position.
Q: What is CUMMINS INC's Free Cash Flow Margin?
CUMMINS INC (CMI) has a free cash flow margin of 7.1%, generating $2.4 billion in free cash flow over the trailing twelve months. A FCF margin between 5-10% is typical for capital-intensive businesses.
Q: Is CUMMINS INC stock overvalued or undervalued?
CUMMINS INC (CMI) trades at a P/E ratio of 24.8x, which is above the sector median of N/A. The EV/Sales multiple is 2.2x. Free cash flow yield is 3.4%, which is in line with market averages.
Q: Does CUMMINS INC pay a dividend?
CUMMINS INC (CMI) currently pays a dividend yield of 1.5%. Including share buybacks, the total shareholder yield is 1.5%. The relatively low yield suggests the company prioritizes growth reinvestment over income distribution.
Q: How much debt does CUMMINS INC have?
CUMMINS INC (CMI) has a debt-to-equity ratio of 0.6x with total debt of $7.2 billion. Net debt position is $3.6 billion.
Q: What is CUMMINS INC's revenue and earnings growth?
CUMMINS INC (CMI) declined revenue by 1.3% year-over-year. Earnings per share decreased by 27.3% compared to the prior year. Revenue decline may indicate market challenges or industry headwinds.
Q: How does CUMMINS INC compare to competitors in Industrials?
Compared to other companies in Industrials, CUMMINS INC (CMI) shows: ROIC of 15.9% is above the sector median of 7.3% (Top 21%). FCF margin of 7.1% exceeds the sector median of 4.7% (Top 40% of sector). Gross margin at 25.3% is 7.8 percentage points lower than sector peers. These rankings are based on MetricDuck's analysis of all Industrials companies with available SEC filings.
Q: What warning signs should I watch for with CUMMINS INC?
Investors in CUMMINS INC (CMI) should monitor these potential warning signs: 1) ROIC has been declining, potentially signaling deteriorating competitive position. Regular monitoring of SEC filings and quarterly trends is recommended.
Data Source: Data sourced from 10-Q filed 2025-11-06. TTM metrics as of Q4 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
Scope: This analysis covers SEC filing fundamentals — profitability, cash flow, balance sheet, and valuation metrics. For analyst estimates and price targets, consult sell-side research.
This analysis is for informational purposes only and does not constitute investment advice.