Why Is Cummins (CMI) Down 6.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Cummins (CMI). Shares have lost about 6.1% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is Cummins due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers. Cummins Q4 Earnings Surpass Expectations, Sales Decline Y/YCummins reported fourth-quarter 2024 earnings of $5.16 per share, which surpassed the Zacks Consensus Estimate of $4.68 and increased from $4.14 recorded in the corresponding quarter of 2023. The outperformance was driven by higher-than-expected revenues from the Power Systems and Distribution segments. Cummins’ revenues totaled $8.45 billion, which beat the Zacks Consensus Estimate of $8.13 billion but declined from $8.54 billion recorded in the year-ago quarter. Key TakeawaysIn the reported quarter, sales in the Engine segment were down 2% year over year to $2.7 billion. The metric also missed our estimate of $2.75 billion. Sales in North America and International markets decreased 2% and 3% year over year, respectively, due to weaker demand in global heavy-duty truck markets and lower North America pickup units. The segment’s EBITDA rose to $367 million (accounting for 13.5% of sales) from $353 million (12.7% of sales) in the year-ago period and beat our estimate of $355.1 million.Sales in the Distribution segment totaled $3.1 billion, which rose 13% year over year and topped our projection of $2.93 billion. Sales in North America rose 10%, while international sales rose 19% due to increased demand for power generation products. The segment’s EBITDA came in at $400 million (13% of sales), which increased from the year-ago quarter’s $269 million (9.9% of sales) and surpassed our estimate of $316.3 million.Sales in the Components segment totaled $2.6 billion, down 17% from the prior-year quarter. Sales also missed our estimate of $2.67 billion. Revenues in North America fell 12% and international sales contracted 24% on the separation of the Atmus business and lower demand in heavy-duty trucks. The segment’s EBITDA was $361 million (13.7% of sales), lower than the year-ago figure of $406 million (12.7% of sales). The metric outpaced our estimate of $329.3 million.Sales in the Power Systems segment rose 22% from the year-ago quarter to $1.7 billion and beat our estimate of $1.61 billion. While North America sales increased 42%, international sales rose 12% due to increased demand for power generation. The segment’s EBITDA rose to $314 million (18% of sales) from $182 million (12.7% of sales) and beat our estimate of $282.7 million.Sales in the Accelera segment came in at $100 million, up 23% from the year-ago level but lagged our estimate of $116.9 million. The segment incurred a pretax loss of $431 million, wider than our estimate of $95.8 million. Costs related to the development of electric powertrains, fuel cells and electrolyzers, as well as products to support battery electric vehicles, resulted in EBITDA losses.Financials & OutlookCummins’ cash and cash equivalents were $1.67 billion as of Dec. 31, 2024, down from $2.18 billion on Dec. 31, 2023. Long-term debt totaled $4.78 billion, down from $4.8 billion as of Dec. 31, 2023.Cummins expects full-year 2025 revenues to be down 2-3% year over year. EBITDA is anticipated to be in the range of 16.2-17.2%. Cummins continues to stick to its plan of returning nearly 50% of its operating cash flow to shareholders.How Have Estimates Been Moving Since Then?It turns out, fresh estimates have trended downward during the past month.VGM ScoresAt this time, Cummins has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.OutlookEstimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Cummins has a Zacks Rank #3 (Hold). 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