CMI Q2 Earnings Call Points to Power Demand and Higher Outlook

CMI Raises Its 2026 Outlook

Chair and CEO Jennifer Rumsey raised 2026 revenue growth guidance to 10-13% from 8-11%. Cummins also lifted EBITDA guidance to 18-18.5% from 17.75-18.5%.

Rumsey tied the revision to stronger North American on-highway demand, China construction activity and sustained power generation orders. Cummins also increased heavy and medium-duty truck market forecasts.

CFO Mark Smith said that the second half should deliver stronger EBITDA percentages than the first half and the year-ago period. He added that no unusual benefit supports the implied improvement.

Cummins Leans on Data Center Power

Rumsey maintained the forecast for global power generation revenue growth of 15-25%, with large generator sets operating near capacity.

She highlighted a multiyear agreement with a global hyperscaler covering several gigawatts of future backup-power demand. Cummins also secured natural gas generator and microgrid work for a Texas high-performance computing project.

During Q&A, a Citigroup analyst asked about lead times. Mark Smith said that new demand for the 95-liter platform extends into the second half of 2028, while broader orders continue to grow.

CMI Sees a Smoother 2027 Engine Shift

Rumsey outlined limited production of the 2027 X15 and X10 engines beginning in January 2027. Full production is planned for the fourth and third quarters of 2027, respectively.

A Truist Securities analyst pressed management on the 2027 setup. Rumsey said that the proposed EPA flexibility should reduce the abruptness of the transition by keeping selected current engines available while new platforms ramp.

Smith said that Cummins expects to pass nonconforming penalties through to the market. He also noted that research spending will remain elevated longer, while product coverage costs should be lower than under a full January launch.

Cummins Expects Margins to Improve

Second-quarter EBITDA margin was 17.5%, down from 18.4% a year earlier, even as EBITDA dollars reached a record. Higher incentive compensation, freight and development spending weighed on several segments.

Smith said that incentive compensation expense should run about $25 million lower per quarter in the third and fourth quarters than in the second quarter. He also identified an incentive-compensation reset of roughly $200 million entering 2027.

Power Systems EBITDA margin increased to 24.5% from 22.8%. Smith cited stronger China demand, joint venture income, production efficiency, supply-chain execution and pricing as contributors.

CMI Finds Broader Demand Support

Rumsey said that North American revenues rose 8%, while international revenue increased 12%. China revenue, including joint ventures, climbed 30% to $2.3 billion.

Cummins raised its China revenue outlook to about 15% growth and improved its global construction forecast to flat to up 10%. However, it reduced the mining outlook to down 5% to up 5% because of elevated inventory.

Smith reported record second-quarter operating cash flow of $1.5 billion. Cummins returned $501 million through dividends and repurchases, consistent with its goal of returning about half of operating cash flow.

Cummins Keeps Execution at the Center

Rumsey’s message combined confidence in demand with discipline around capacity, product launches and customer transitions. Power generation expansion and the phased engine rollout remain the central operating priorities.

Smith emphasized stronger second-half profitability without relying on one-time support. Management remains focused on backlog conversion, launch costs and capacity funding beyond 2026.

Zacks Signals for CMI

CMI carries a Zacks Rank #3 (Hold), with a Value Score of B, a Growth Score of B, a Momentum Score of A and a VGM Score of A. The grades indicate favorable style characteristics, led by momentum and the combined VGM measure. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Hold rank tempers those favorable scores because Style Scores are designed to complement the Zacks Rank, with the strongest combinations centered on Rank #1 or #2 stocks. The Zacks Rank can change as earnings estimates are revised after the just-reported results.

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