UBS raised its price target on Cummins Inc. to $565.00 from $500.00 and opted to keep a Neutral rating on the engine manufacturer. The change was announced on a Friday and follows a reassessment of both the firm's earnings forecast for 2027 and the valuation multiples applied to different parts of Cummins' business.
As of the update, Cummins shares were trading at $567.31 and the company had a market capitalization of $78.22 billion. UBS' revised target represents a roughly 13% increase over its previous guidance and is built around an 18.5x price-to-earnings multiple applied to UBS' 2027 estimated earnings per share of $30.60. For context, Cummins' current trading P/E is 27.5, a level described as high relative to historical norms.
UBS had set its prior $500 target on approximately a 17x multiple applied to an earlier 2027 EPS estimate of $29.50. The new target therefore reflects two drivers: an improvement in the firm's EPS outlook for 2027 and a modest expansion in the multiples used in its valuation framework.
In detailing its approach, UBS uses a sum-of-the-parts valuation. The investment firm now applies a higher near-25x P/E multiple to an estimated 15-20% slice of Cummins' earnings tied to the company's power generation business, up from the prior roughly 20x multiple. For the remainder of Cummins' earnings base, UBS is applying a roughly 17x P/E multiple, an increase from the 16.0-16.5x multiples it used previously.
Separately, Cummins reported fourth-quarter 2025 results that were mixed. The company posted revenue of $8.5 billion, which exceeded a consensus forecast of $8.08 billion. On the bottom line, reported earnings per share were $4.27, below an expected $5.01 - a shortfall of 14.77% versus the forecast. When certain charges are excluded, the company beat consensus adjusted EPS estimates by 14%.
Other analysts reacted to the quarterly release with differing views. Truist Securities increased its price target to $703 and kept a Buy rating, citing what it described as a strong outlook. Bernstein SocGen Group raised its target to $600 from $544 while maintaining a Market Perform rating. Cummins' EBITDA for the quarter came in at $1.4 billion, about 2% ahead of estimates.
These developments illustrate a split in analyst sentiment: UBS has raised its target while remaining Neutral, and other firms have issued higher targets alongside varying ratings. Market participants will watch how Cummins' underlying earnings mix and the valuation multiples applied to those earnings evolve as the company moves toward the 2027 estimate UBS used in its model.