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Investing.com -- Goldman Sachs has upgraded Cummins Inc (NYSE:CMI). to Buy from Neutral, citing a turning point in machinery supply trends and improving fundamentals in the company’s Power Systems division.
“Machinery supply is inflecting positively for the first time in three years,” Goldman Sachs wrote, noting that its April Supply Tracker and backtesting reports support the view.
The firm has increased its weighting in the machinery sector and now prefers it over construction materials and environmental services.
According to Goldman Sachs, “new equipment destock is more than halfway complete, margin expectations have been reset embedding tariff headwinds, and valuations appear reasonable on mid-cycle earnings.”
The analysts believe that the supply picture has improved enough to justify a more bullish stance, with used equipment inventory changes serving as a leading indicator for production adjustments.
The firm now rates Cummins a Buy, highlighting “structurally higher Power Systems profitability (pricing structure beyond data center), derisked EPA 2027 expectations,” and “U.S. truck demand expectations that have been significantly reduced while used sleeper inventory levels are now down 30% year-over-year.”
Goldman Sachs estimates that Cummins is trading at 16x mid-cycle EPS of $20.50, or 14x if improved margins in Power Systems persist.
“We acknowledge our call could be early,” the note added, “as we expect production to bottom in 4Q25/1Q26, but we believe CMI’s Power Systems performance is a meaningful offset.”
The bank also upgraded Terex (NYSE:TEX), reiterated Buy ratings on Deere (NYSE:DE), Caterpillar (NYSE:CAT), United Rentals (NYSE:URI), and Herc Holdings (NYSE:HRI), and downgraded KBR (NYSE:KBR) and Atmus Filtration Technologies to Neutral.