Something's not jibing. That conference call Tuesdays from Cummins CMI , the engine company -- which was about as negative as you can get -- didn't really translate into declines in a lot of other stocks that should have been affected. For example, why were shares of Wabco WBC , the big truck-braking-and-suspension company, not down on the day? The stock was almost at its 52-week-high coming into the session, for heaven's sake. It should have been clubbed.
Caterpillar CAT , despite endless negativity on its last call, really wasn't down much at all, again confounding those who had expected a second world of hurt put in for this key Dow Jones stock. Yes, Caterpilllar has fallen from $89 -- where the stock was when the company reported -- to $84 Tuesday. But all that decline has done is take the stock back to where it had been seven days before it had lowered the boom on itself. It hasn't gone any further than that. Shouldn't Caterpillar have had another pummeling?
Mining-equipment company Joy Global JOY did lose $0.92, dropping from $58.75 to $57.78 -- but, given the run this stock has had in the last 10 days, it should be appreciably lower after the Cummins call. It should maybe be as low as $54 to $55, if what Cummins said about its last quarter applies to the future.
Finally there's Eaton ETN , so related to trucks still, even as the company has diversified into many different electrical processes and controls, especially since the closing of the Cooper deal. What happened there? It finished up on the session, not down, but up $0.76.
What is there to make of this strength in light of the hideous weakness from Cummins, the best-of-breed truck-and-power-engine company?
I think some things that went wrong at Cummins this quarter, were, indeed, Cummins-specific. I had had no idea, for example, how exposed to India this company is. India was an unmitigated disaster. The call made me want to immunize everyone's portfolios against any company dependent upon India for business. Wow. It was shocking.
But what wasn't all that shocking was the weakness in engines. That's because Alcoa AA , which makes the aluminum for it, told you to expect truck weakness going in, and Caterpillar did the same. Cummins came in at a high despite Alcoa and Caterpillar's forecast -- and maybe that was the real oddity. In fact, I felt bad for Caterpillar after I read the Cummins call, because sales were pretty much consistent everywhere in this downturn.
Still, though, what explains the strength in the others relative to Cummins? I think that, unlike Cummins, which was circumspect about the future, Eaton told you that things had started to get better by the end of the quarter and that October's been good.
Cummins gave you no hope to speak of. But, due to Eaton's comments, I am more emboldened to suggest buying Cummins after all of the estimates come down Wednesday.
If there is anything that's truly disappointing about Cummins that's not transient, it's how little attention the company paid to its natural-gas-engine initiative. The company didn't even bring it up. An analyst asked about it, and the management's reaction was curious, to say the least. Mark Smith, the investor-relations executive on the call, responded to a query about how well its new natural gas engines were selling by saying the "acceptance has been good." Then, after a brief moment, he added, "In fact, our sales are running a bit higher than our internal projections."
If that's the case, I would have thought that Cummins would have stressed it much more, yet it was more of an afterthought. It's totally depressing for those of us who want to see a switch from dirty imported diesel to much cleaner liquefied natural gas, especially with the new Cummins engine, which I thought was a very big deal for the industry.
Look, Cummins is a great American company. It is going to do amazing things when fleets start replacing old engines and countries expand environmental laws to make for cleaner, less-polluting machines.
Right now, though, I think Cummins has opened our eyes to the fact that this best-of-breed player is no more immune than are many others in the sector. To that I say: OK, if that's the case, the expectations are now wrenched out, and it's time to try to figure out a good entry point if, alas, it isn't here already. Cummins shares never sold off in light of all of the weakness abounding away. If Eaton is right and trucking is troughing, Cummins is the one to own. I bet it, too, is troughing, right here, right now, and you just caught still one more chance to pick some up at better prices than you might get just a few weeks from now.