Cummins (CMI) Margin Compression Challenges Bullish Earnings Growth Narratives

Cummins (CMI) has wrapped up FY 2025 with Q4 revenue of US$8.5b and basic EPS of US$4.29, alongside trailing twelve month revenue of US$33.7b and EPS of US$20.62 framing the full year picture. The company has seen quarterly revenue move from US$8.4b in Q4 2024 to US$8.5b in Q4 2025, while basic EPS shifted from US$3.04 to US$4.29 over the same period. Trailing net profit margin is 8.4% compared with 11.6% a year earlier, so the latest print puts the spotlight squarely on how much of that margin compression investors are prepared to accept against the current earnings power.

See our full analysis for Cummins.

With the numbers on the table, the next step is to set this earnings profile against the widely followed narratives about Cummins to see which views hold up and which ones the latest margin and growth trends call into question.

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Margins Compress Despite Solid Net Income

• Over the last 12 months, Cummins generated about US$33.7b of revenue and US$2.8b of net income, yet its trailing net profit margin moved from 11.6% a year ago to 8.4% now.
• Bulls often highlight Cummins as an industrial backbone with earnings growth forecasts of about 15.4% per year. This margin squeeze creates tension with that view by showing that higher earnings forecasts are currently sitting on a slimmer slice of profit relative to sales.

Earnings Growth Forecast Versus Revenue Pace

• Revenue is forecast to grow 6.7% per year while earnings are forecast to grow 15.4% per year, so projected profit growth is faster than projected top line growth even though the most recent trailing margin sits at 8.4% compared with 11.6% a year earlier.
• What stands out for a bullish angle is that five year earnings growth of roughly 8.2% per year, together with a 15.4% earnings growth forecast, sits alongside slower expected revenue expansion and a lower margin. This means the growth story leans heavily on future efficiency or mix rather than the recent margin trend.

If you want to see how other investors are joining the dots between these growth forecasts and margins, have a look at the Curious how numbers become stories that shape markets? Explore Community Narratives.

Valuation, DCF Gap And Dividend Income

• At a share price of US$577.73, Cummins trades on a P/E of 28.1x, slightly below the US Machinery industry average of 29.2x and peer average of 29.8x, and about 4.3% under a DCF fair value of roughly US$603.48 while offering a 1.38% dividend yield.
• Supporters of a bullish stance often point to this combination of a modest DCF gap and income stream. The current setup backs that view numerically because the stock is below both the US$603.48 DCF fair value and peer P/E multiples, even as trailing margins have eased to 8.4% from 11.6%, which is a key figure for investors who want earnings growth and income to feel well supported.

Next Steps

Don’t just look at this quarter; the real story is in the long-term trend. We’ve done an in-depth analysis on Cummins’s growth and its valuation to see if today’s price is a bargain. Add the company to your watchlist or portfolio now so you don’t miss the next big move.

Explore Alternatives

Cummins is currently working with a thinner 8.4% net profit margin compared with 11.6% a year earlier, while expectations lean heavily on faster earnings growth than revenue.

If that mix of compressed margins and reliance on earnings forecasts feels a bit tight for your comfort, you might want to line it up against 86 resilient stocks with low risk scores that focus on companies with more resilient profiles and potentially steadier fundamentals.

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
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Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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