Cummins Shares Lower Following Downgrade, Removal From Buy List At Goldman Sachs

Shares of Cummins Inc. (NYSE: CMI) were trading lower by nearly 1 percent on Wednesday after Goldman Sach's analyst Jerry Revich downgraded shares to Neutral from Buy with an unchanged $155 price target.

Revich cited an increasingly challenging multi-year outlook for South America, Asia and Middle East machinery demand, while the company's $2.5 billion U.S. product cycle that has been a central to a positive outlook has been largely realized.

Looking to China, Revich estimated the company can see $500 million of end market outgrowth over the next two years driven by Components content on new engines and $350 million of share gains on Foton platforms. By comparison, the analyst noted that the company has gained $2.5 billion of content and share in the U.S. since 2010.

Finally, Revich also noted that Cummins is in the middle of integrating its acquired distributions, a move that can enhance capital deployment and is reinforced by long-term management incentives based on returns.