Cummins (CMI) experienced a sharp decline of 12.6% in late trading on Thursday, as its latest earnings report indicated the company is confronting challenges in the on-highway market.

The company reported mixed results for the fourth quarter; despite earnings per share surpassing expectations, its stock price fell. Fourth-quarter revenue increased by 1.1% year-over-year to $8.54 billion, halting a previous trend of declines over four consecutive quarters. The company reinstated its full-year guidance, projecting revenue growth of 3% to 8% for fiscal year 2026, aligning with market expectations.

This performance was primarily driven by robust growth in global power generation demand, increased pickup truck sales, and improved pricing, which helped offset the impact of weak North American heavy- and medium-duty truck sales.

Revenue from the Power Systems business rose 11% year-over-year to $1.9 billion, benefiting mainly from growing demand for data center backup power and a favorable pricing environment.

Distribution business revenue grew 7% to $3.3 billion, supported by a favorable mix in power generation activities and resilient aftermarket operations.

Components business sales decreased 7% to $2.4 billion, largely due to the cyclical downturn in the on-highway transportation sector, although international sales increased by 4%, bolstered by stronger demand in Europe and China.

Engine sales declined by 4% to $2.6 billion, weighed down by weak demand in North America, though this was partially offset by higher pickup truck volumes.

Revenue from the Accelera zero-carbon business increased 31% to $131 million, but the segment reported an EBITDA loss of $374 million, attributed to costs related to electrolyzer project reviews and product cost pressures from weak hydrogen demand.

Cummins anticipates that its North American on-highway business will remain under pressure through the first half of 2026, with conditions expected to improve in the second half. Meanwhile, power generation, industrial, and aftermarket segments are projected to stay strong.

Analysts noted that Cummins' fourth-quarter results reflect a diverging market environment. The power generation business excelled due to strong data center demand and steady aftermarket performance, but the cyclical downturn in on-highway transportation, particularly in North America, continued to drag on the engine and components divisions. The Accelera segment faced significant losses due to related accruals, adding complexity to the quarter's performance. Although the company reinstated its financial guidance, investors remain cautious because of policy uncertainties and the expectation that recovery is primarily weighted toward the second half of the year.