Cummins Stock Falls as Q4 Earnings Miss Expectations

Cummins Inc., a leading engine maker, experienced a decline in its stock prices following lower-than-expected fourth-quarter earnings. The company's guidance for 2024 has also not been received well by the market.

On Tuesday morning, Cummins reported adjusted earnings per share of $4.14, with sales reaching $8.5 billion. However, Wall Street analysts had anticipated earnings per share of $4.45 on sales of $8.1 billion, as per FactSet data. In comparison, Cummins had reported earnings per share of $4.52 and sales of $7.8 billion in the same period last year.

While earnings fell slightly short, it is worth noting that there were various adjustments for investors to consider. One of these adjustments included a charge of $2 billion, or $13.76 per share, related to a previously disclosed regulatory settlement. Notably, the company's EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) came in at $1.2 billion, aligning with Wall Street's expectations.

The EBITDA figure appears solid; however, both the EBITDA guidance for 2024 and fourth-quarter earnings per share seem slightly underwhelming. Cummins expects to generate approximately $4.9 billion in EBITDA with sales of around $30 billion in 2024, while Wall Street had anticipated higher figures - approximately $5.1 billion in EBITDA and sales of $33.2 billion.

In 2023, Cummins reported sales of approximately $34.1 billion.

As a result of these developments, Cummins shares witnessed a 2.1% decline in Tuesday's premarket trading. In contrast, S&P 500 futures remained unchanged, and Nasdaq Composite futures were down about 0.1%.

While Cummins' guidance did not meet Wall Street's expectations, the market was not anticipating exceptionally high earnings from the company. Over the past 12 months, Cummins shares have already experienced a 4% decrease, while the S&P 500 and Nasdaq Composite have seen respective increases of about 20% and 31%.

Furthermore, Cummins stock currently trades at a multiple equivalent to 12.5 times estimated 2024 earnings, whereas the S&P 500 trades at around 20 times. The lower valuation for Cummins may reflect the market's belief that cyclical companies experience reduced earnings when conditions are optimal.

Cummins management will host a conference call at 10 a.m. Eastern time to provide further insights on the results.