Cummins' (CMI) risk-reward profile now appears "more balanced" as the truck cycle is expected to hit its lowest point in 2026, UBS Securities said in a note emailed Tuesday.

The firm said "downside risk" in Cummins' engine and components business is likely to persist into the first half of 2026, with truck market declines expected to be deeper than Wall Street estimates and margin pressure still a concern.

Strong momentum in the company's power-generation segment, which has posted record orders and carries a backlog largely filled through 2027, is helping offset the downturn in trucks, according to the note.

The investment bank said it expects Cummins' earnings per share to rise 23% in 2027 on data-center demand and a truck-market rebound, and raised its 2025 to 2027 EPS estimates by 11% to 20% due to stronger Power Systems and Distribution performance.

A "modest pre-buy" in late 2026 ahead of new 2027 US Environmental Protection Agency emissions rules is also expected to support a "cyclical recovery," though UBS cautioned that consensus estimates already appear "optimistic."

UBS upgraded Cummins to neutral from sell, and raised its price target to $500 from $350.

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