It has been about a month since the last earnings report for CNH Industrial . Shares have added about 9.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CNH due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
CNH Industrial Q2 Loss-Narrower-Than-Expected
CNH Industrial posted second-quarter 2020 adjusted loss per share of 7 cents, narrower than the Zacks Consensus Estimate of loss of 12 cents per share. In the prior-year quarter, adjusted earnings were 31 cents per share. This year-over-year decline primarily resulted from lower revenues across all segments.
The company reported adjusted net loss of $85 million, as against the prior-year quarter’s net income of $430million.
Consolidated revenues declined 26% from the year-ago quarter level to $5.6 billion, beating the Zacks Consensus Estimate of $4.3 billion. The company’s net sales for Industrial Activities came in at $5.2 billion, down 27% year on year. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $160 million in the second quarter, marking a slump from the $768 million recorded in the prior-year quarter.
Segmental Performances
Net sales in the Agricultural Equipment segment declined 17.9% year over year to $2.54 billion in the quarter on lower industry volumes amid the coronavirus crisis, primarily in Europe. Moreover, the segment’s adjusted EBIT came in at $203 million, down 40.5% from the year-ago quarter, thanks to unfavorable volume and mix and negative fixed cost absorption.
The Construction Equipment segment’s sales plunged 44.5% year over year to $420 million in second-quarter 2020. This decline chiefly resulted from the dismal market conditions amid the pandemic, continued channel inventory destocking actions, mainly in North America, and negative price realization. Further, the segment incurred a pretax loss of $87 million, as against the income of $25 million recorded in the prior-year quarter, hurt by lower volumes and negative fixed cost absorption due to lower production levels.
During the June-end quarter, revenues in Commercial and Specialty vehicles fell 35.5% year over year to $1.74 billion, mainly affected by decreased volumes across all geographies amid the pandemic. The segment incurred pretax loss of $156 million, as against the income of $100 million recorded in the prior-year quarter. This downside primarily stemmed from lower volumes and the negative impact of plant shutdowns on product cost.
The Powertrain segment’s quarterly revenues dipped 32.7% year over year to $763 milliondue to volume reduction, particularly for light and medium engines in Europe, amid the COVID-19 crisis. The segment’s adjusted EBIT was $32 million, down from the year-ago quarter’s $102 million on lower volume.
The Financial Services segment revenues slipped 15% year over year to $441 million in the second quarter due to lower remarketing volume and lower average portfolios in North America and Europe. Adjusted EBIT was $73 million, down from the year-earlier period’s $124 million.
Financial Details
CNH Industrial had cash and cash equivalents of $5.14 billion as of Jun 30, 2020, compared with $4.87 billion as of Dec 31, 2019. The company’s debt was $24.45 billion as of Jun 30, 2020, compared with $24.85 billion as of Dec 31, 2019.
As of Jun 30, 2020, CNH Industrial’s net cash provided by operating activities was $535 million compared with net cash used of $503 million in the prior-year quarter.
CNH Industrial suspended its quarterly cash dividend due to the pandemic-related uncertainties.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 132.05% due to these changes.
VGM Scores
Currently, CNH has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, CNH has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is CNH (CNHI) Up 9.8% Since Last Earnings Report?
It has been about a month since the last earnings report for CNH Industrial . Shares have added about 9.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is CNH due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
CNH Industrial Q2 Loss-Narrower-Than-Expected
CNH Industrial posted second-quarter 2020 adjusted loss per share of 7 cents, narrower than the Zacks Consensus Estimate of loss of 12 cents per share. In the prior-year quarter, adjusted earnings were 31 cents per share. This year-over-year decline primarily resulted from lower revenues across all segments.
The company reported adjusted net loss of $85 million, as against the prior-year quarter’s net income of $430million.
Consolidated revenues declined 26% from the year-ago quarter level to $5.6 billion, beating the Zacks Consensus Estimate of $4.3 billion. The company’s net sales for Industrial Activities came in at $5.2 billion, down 27% year on year. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $160 million in the second quarter, marking a slump from the $768 million recorded in the prior-year quarter.
Segmental Performances
Net sales in the Agricultural Equipment segment declined 17.9% year over year to $2.54 billion in the quarter on lower industry volumes amid the coronavirus crisis, primarily in Europe. Moreover, the segment’s adjusted EBIT came in at $203 million, down 40.5% from the year-ago quarter, thanks to unfavorable volume and mix and negative fixed cost absorption.
The Construction Equipment segment’s sales plunged 44.5% year over year to $420 million in second-quarter 2020. This decline chiefly resulted from the dismal market conditions amid the pandemic, continued channel inventory destocking actions, mainly in North America, and negative price realization. Further, the segment incurred a pretax loss of $87 million, as against the income of $25 million recorded in the prior-year quarter, hurt by lower volumes and negative fixed cost absorption due to lower production levels.
During the June-end quarter, revenues in Commercial and Specialty vehicles fell 35.5% year over year to $1.74 billion, mainly affected by decreased volumes across all geographies amid the pandemic. The segment incurred pretax loss of $156 million, as against the income of $100 million recorded in the prior-year quarter. This downside primarily stemmed from lower volumes and the negative impact of plant shutdowns on product cost.
The Powertrain segment’s quarterly revenues dipped 32.7% year over year to $763 milliondue to volume reduction, particularly for light and medium engines in Europe, amid the COVID-19 crisis. The segment’s adjusted EBIT was $32 million, down from the year-ago quarter’s $102 million on lower volume.
The Financial Services segment revenues slipped 15% year over year to $441 million in the second quarter due to lower remarketing volume and lower average portfolios in North America and Europe. Adjusted EBIT was $73 million, down from the year-earlier period’s $124 million.
Financial Details
CNH Industrial had cash and cash equivalents of $5.14 billion as of Jun 30, 2020, compared with $4.87 billion as of Dec 31, 2019. The company’s debt was $24.45 billion as of Jun 30, 2020, compared with $24.85 billion as of Dec 31, 2019.
As of Jun 30, 2020, CNH Industrial’s net cash provided by operating activities was $535 million compared with net cash used of $503 million in the prior-year quarter.
CNH Industrial suspended its quarterly cash dividend due to the pandemic-related uncertainties.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 132.05% due to these changes.
VGM Scores
Currently, CNH has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, CNH has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.