Goldman Turns Bullish On Cummins Amid Profit Shift And Quiet Data Center Play

Cummins Inc (NYSE:CMI) is poised to benefit from structurally higher unit profitability in Power Systems and its pricing structure moving beyond datacenter, according to Goldman Sachs.

The Cummins Analyst: Analyst Jerry Revich upgraded the rating from Neutral to Buy.

The Cummins Thesis: Margins in the company's Power Systems segment have expanded from its historical range of 5%-10% to 15%-20%, "driven by a transition to value-based pricing, with capacity and product line expansion for large generators (including data centers) contributing," Revich said in the note.

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Cummins' Power Systems segment is currently estimated to derive sales of $1.5 billion from data center, he added.

"Although data center investment is only 3% of U.S. private non-residential construction investment today, based on a range of growth outcomes, it could account for 5-10% of U.S. private non-residential construction investment in 2030," the analyst wrote.

Sleeper truck used inventory levels are down 30% year over year and OEMs have guided to production cuts, Revich further stated.

CMI Price Action: Shares of Cummins had risen by 2.92% to $326.49 at the time of publication on Tuesday.

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