Buy this power generation stock for more than 35% upside, Goldman Sachs says
Cummins could see strong demand for its power generation products beyond a growing appetite for data centers, according to Goldman Sachs. Goldman upgraded the engine, power generation and electric vehicle component manufacturer to buy from neutral on Tuesday. The bank also raised its price target to $431 per share from $410, which implies 36% upside from Friday's close. "We see (i) structurally higher Power Systems profitability (pricing structure beyond data center), (ii) derisked EPA 2027 expectations, and (iii) US truck demand expectations that have been significantly reduced while used sleeper inventory levels that are now down 30% yoy," analyst Jerry Revich said. CMI YTD mountain Cummins Inc. stock in 2025. "Cummins has expanded its Power Systems margins over the course of this cycle from a range of 5-10% historically to a 15-20% run-rate and within the context of CAT's ~20% margin for Energy & Transportation. The margin expansion has been driven by a transition to value-based pricing, with capacity and product line expansion for large generators (including data centers) contributing," Revich said. The analyst's bullish call is in concert with a more optimistic view of the machinery sector, which he said is at an inflection point. "Machinery supply is inflecting positively for the first time in three years, new equipment destock is more than halfway complete, margin expectations have been reset embedding tariff headwinds, and valuations appear reasonable on mid-cycle earnings," Revich said. Shares have slipped 9% in 2025 but have gained more than 7% in May. The stock climbed more than 2% following the upgrade. Despite the upgrade, most analysts are cautious on the stock. LSEG data shows 15 of 24 of those covering Cummins rate it a hold, while another eight have a buy or strong buy rating. The average price target implies upside of 11%.
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