CMI Heads Into Tuesday's Print With Shorts Retreating

Cummins arrives at its August 4 earnings release with the short-selling community notably less convinced of the bear case than it was just weeks ago.

Short sellers have been covering steadily and decisively. Short interest has dropped 23% over the past month to just 1.4% of the free float — a low absolute level that has been falling in a near-straight line since mid-July. Borrow costs remain negligible at 0.42%, and availability is effectively unlimited, meaning there is no friction at all for new shorts to enter if they chose to. The lending market is, in every meaningful sense, uncrowded. The ORTEX short score has drifted lower alongside, easing from 31.7 in late July to 29.5 — a reading that places CMI comfortably in the low-short-pressure tier.

Options positioning adds a contrasting note. Investors have turned more constructive into the print than they have been all year. The put/call ratio fell to 0.98 on Monday — nearly two standard deviations below its 20-day average of 1.04, and the lowest reading in the past 52 weeks. That is a notable shift: for most of the past year, options flow in CMI has leaned more defensive, with puts consistently outweighing calls. The current setup reflects genuine call demand, not simply a collapse in put activity.

The analyst community has maintained the bullish stance documented in the prior preview. The consensus mean sits near $755, roughly 16% above Monday's close of $648.85, with Morgan Stanley at $761 (Overweight) and Citigroup at $790 (Buy) both reaffirming targets within the last three weeks. The bull case remains anchored to power generation: 18% Power Systems revenue growth and a 12-month forward EPS trend ranking in the 93rd percentile of the ORTEX universe. Bears retain their focus on margin compression — gross margins down 120 basis points year-over-year to 22.9% — and on China exposure, where heavy-duty truck demand continues to weaken. The stock has recovered from its August lows but remains roughly 2% softer on the week, keeping the gap between Street targets and current price meaningfully wide.

Among close peers, most names have had a tough week: CAT fell more than 8% and TEX shed 10%, while GTES bucked the group with a 4% gain. CMI's relative steadiness — down less than 2% on the week — distinguishes it from the broader industrial selloff and may reflect the same short-covering dynamic visible in the positioning data.

Today's print tests whether the power generation cycle is durable enough to offset the margin drag from tariffs and softer truck volumes — and whether a recovering stock price, alongside a Street consensus now 16% above it, has room to compress further or finally close.