What Happened?
Shares of engine manufacturer Cummins (NYSE: CMI) fell 12% in the afternoon session after the company reported weaker fourth-quarter results, where a significant miss on profit expectations overshadowed a revenue beat.
The company posted earnings per share of $4.27, falling 14.9% short of the $5.02 analysts had forecasted. This profit shortfall occurred despite revenue growing 1.1% year-on-year to $8.54 billion, which surpassed expectations of $8.11 billion. The lower-than-expected profitability was partly due to a decline in the company's gross profit margin, which fell to 22.9% from 25.4% in the same quarter last year. The market reacted negatively to the news, signaling that investors were more concerned with the earnings miss and contracting margins than the better-than-expected sales.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Cummins? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Cummins’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. Moves this big are rare for Cummins and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was about 2 months ago when the stock gained 4.8% on the news that the Federal Reserve lowered its benchmark interest rate by a quarter-percentage point, signaling a more accommodative monetary policy.
This dovish action, combined with highly accommodating signals from Chair Jerome Powell and the Federal Open Market Committee (FOMC), sent the Dow Jones Industrial Average and S&P 500 surging. The market's bullish reaction was rooted in several key takeaways from the Fed's announcement. Most significantly, the central bank confirmed it would begin expanding its balance sheet by buying short-term bonds, a move that injects critical liquidity and lowers short-term Treasury yields. Furthermore, the Fed signaled a shift in priority by removing language that described the labor market as "remaining low," suggesting it would be more focused on supporting economic growth. While the Fed's official forecast projected only one cut for the next year, traders immediately priced in the expectation of more aggressive easing, banking on at least two rate reductions. This widespread anticipation of sustained, low borrowing costs and the virtual certainty that rate hikes would be off the table boosted corporate valuations and created powerful momentum for the equity market rally.
Cummins is up 1.2% since the beginning of the year, but at $528.26 per share, it is still trading 12.8% below its 52-week high of $605.63 from February 2026. Investors who bought $1,000 worth of Cummins’s shares 5 years ago would now be looking at an investment worth $2,300.
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