Why Cummins Stock Tumbled 10.6% in January


There wasn't a single news release or any pressing development for Cummins (NYSE: CMI) in January. Why, then, did the stock crumble 10.6% during the month, according to data from S&P Global Market Intelligence? The shares moved eerily similar to Caterpillar (NYSE: CAT), and that partly explains what made Cummins' investors jittery in January. From end-use markets to geographical exposure, the two companies have a lot in common, after all.

Global companies like Cummins bank on populous and expanding economies like China for growth, which is why any adverse geopolitical and economic developments are reflected in the share price. The recent outbreak of the coronavirus is one such event.

Cummins has substantial exposure to China. The country was the second-largest market for the engine manufacturer in 2018, accounting for 10% of its total net sales (Cummins is yet to file its 2019 annual report, so we do not have a geographical breakdown of its last year's sales). It operates its largest manufacturing joint ventures from China, including the Beijing Foton Cummins Engine Company, the Dongfeng Cummins Engine Company, and the Chongqing Cummins Engine Company.

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