Wolfe Research downgraded Cummins (NYSE: CMI) from Outperform to Peerperform, citing limited remaining upside following strong share price performance.

The firm noted that Cummins was the second-best performing stock in its coverage universe last year, rising 46% after already outperforming in 2024. Wolfe said its prior upgrade had been based on Cummins' underappreciated exposure to data centers and leverage to a recovery in the Class 8 engine market.

Since then, power generation sales and margins continued to exceed expectations, and Wolfe grew more optimistic about a Class 8 recovery amid improving truckload spot rates and clarity around EPA 2027 regulations. However, the firm said these positives now appeared fully reflected in the stock price.

Wolfe raised its 2027 earnings estimate by another 6% to $32 per share, moving above consensus forecasts. Even so, the firm said that applying a well-above-historical 20 times earnings multiple implied only about 12% upside. Wolfe added that achieving more attractive returns would require assuming both unusually strong earnings growth and a sustained premium valuation multiple.

With shares trading above its prior upside target, Wolfe said the risk-reward had become less compelling and elected to move to the sidelines by lowering its rating to Peerperform.