A month has gone by since the last earnings report for CNH Industrial . Shares have lost about 1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CNH due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
CNH Industrial Q1 Earnings Top Estimates, Down Y/Y
CNH Industrial posted first-quarter 2022 adjusted earnings per share of 28 cents that decreased 12.5% from 32 cents in the prior-year quarter but topped the Zacks Consensus Estimate of 25 cents. Higher-than-anticipated revenues across the Construction Equipment and the Financial Services segments resulted in this outperformance.
In the first quarter, consolidated revenues fell around 37.8% from the year-ago level to $4,645 million but topped the consensus mark of $4,606.5 million. The company’s net sales for industrial activities came in at $4,180 million, up 13%, led by favorable pricing.
Segmental Performance
In the March quarter, net sales in the Agricultural Equipment segment jumped 11% year over year to $3,377 million due to a favorable price realization and mix mainly driven by the North America and South America regions. The metric, however, lagged the Zacks Consensus Estimate of $3,488 million. The segment’s adjusted EBIT came in at $426 million, rising 6.7% year over year and matching the consensus mark. The adjusted EBIT margin, however, decreased to 12.6% from 13.1% amid higher labor cost as well as increased selling, general & administrative (SG&A) and research & development (R&D) spend.
The Construction Equipment segment’s sales grew 22% year over year to $803 million in the quarter, led by higher volumes due to higher industry demand in the main markets, market share growth and favorable price realization, primarily in North America and South America. Revenues from the unit also outpaced the Zacks Consensus Estimate of $712 million. Adjusted EBIT came in at $32 million, gaining 25% and topping the consensus mark of $21.49 million on the back of favorable volume and better price realization. The adjusted EBIT margin slightly increased to 4% from 3.8% in the year-ago quarter.
The Financial Services segment revenues went up 17% to $466 million and topped the consensus mark of $440 million on higher used equipment sales, increased base rates in South America and average portfolios in South America and EMEA. Net income from the segment jumped 5.1% to $82 million.
Financial Details
CNH Industrial had cash and cash equivalents of $3,219 million as of Mar 31, 2022, down from $5,044 million as of Dec 31, 2021. The company’s debt totaled $21,335 million at the end of the first quarter of 2022, up from $20,897 million as of Dec 31, 2021. The firm had available liquidity of $9,399 million as of Mar 31, 2022, compared with $10,521 million at 2021-end.
CNH Industrial’s net cash used in operating activities was $887 million against net cash of $241 million provided by operating activities in the previous-year quarter. Free cash flow from industrial activities was $1,059 million in the quarter.
2022 Guidance
CNH Industrial keeps its previous estimates for 2022 unchanged. Its net sales from industrial activities (including currency-translation effects) for 2022 are expected to increase in the band of 10-14% year over year. It expects to generate more than $1 billion in free cash flow from industrial activities in 2022. R&D expenses and capex are projected at around $1.4 billion, rising from $1 billion in 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -6.55% due to these changes.
VGM Scores
Currently, CNH has a subpar Growth Score of D, a grade with the same score on the momentum front. 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CNH has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Image: Bigstock
CNH (CNHI) Down 1% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for CNH Industrial . Shares have lost about 1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is CNH due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
CNH Industrial Q1 Earnings Top Estimates, Down Y/Y
CNH Industrial posted first-quarter 2022 adjusted earnings per share of 28 cents that decreased 12.5% from 32 cents in the prior-year quarter but topped the Zacks Consensus Estimate of 25 cents. Higher-than-anticipated revenues across the Construction Equipment and the Financial Services segments resulted in this outperformance.
In the first quarter, consolidated revenues fell around 37.8% from the year-ago level to $4,645 million but topped the consensus mark of $4,606.5 million. The company’s net sales for industrial activities came in at $4,180 million, up 13%, led by favorable pricing.
Segmental Performance
In the March quarter, net sales in the Agricultural Equipment segment jumped 11% year over year to $3,377 million due to a favorable price realization and mix mainly driven by the North America and South America regions. The metric, however, lagged the Zacks Consensus Estimate of $3,488 million. The segment’s adjusted EBIT came in at $426 million, rising 6.7% year over year and matching the consensus mark. The adjusted EBIT margin, however, decreased to 12.6% from 13.1% amid higher labor cost as well as increased selling, general & administrative (SG&A) and research & development (R&D) spend.
The Construction Equipment segment’s sales grew 22% year over year to $803 million in the quarter, led by higher volumes due to higher industry demand in the main markets, market share growth and favorable price realization, primarily in North America and South America. Revenues from the unit also outpaced the Zacks Consensus Estimate of $712 million. Adjusted EBIT came in at $32 million, gaining 25% and topping the consensus mark of $21.49 million on the back of favorable volume and better price realization. The adjusted EBIT margin slightly increased to 4% from 3.8% in the year-ago quarter.
The Financial Services segment revenues went up 17% to $466 million and topped the consensus mark of $440 million on higher used equipment sales, increased base rates in South America and average portfolios in South America and EMEA. Net income from the segment jumped 5.1% to $82 million.
Financial Details
CNH Industrial had cash and cash equivalents of $3,219 million as of Mar 31, 2022, down from $5,044 million as of Dec 31, 2021. The company’s debt totaled $21,335 million at the end of the first quarter of 2022, up from $20,897 million as of Dec 31, 2021. The firm had available liquidity of $9,399 million as of Mar 31, 2022, compared with $10,521 million at 2021-end.
CNH Industrial’s net cash used in operating activities was $887 million against net cash of $241 million provided by operating activities in the previous-year quarter. Free cash flow from industrial activities was $1,059 million in the quarter.
2022 Guidance
CNH Industrial keeps its previous estimates for 2022 unchanged. Its net sales from industrial activities (including currency-translation effects) for 2022 are expected to increase in the band of 10-14% year over year. It expects to generate more than $1 billion in free cash flow from industrial activities in 2022. R&D expenses and capex are projected at around $1.4 billion, rising from $1 billion in 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -6.55% due to these changes.
VGM Scores
Currently, CNH has a subpar Growth Score of D, a grade with the same score on the momentum front. 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, CNH has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.