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Zacks Report Date: February 11, 2025 |
Summary
Data Overview
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| 20 Day Average Volume (sh) | NA |
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| YTD Price Change | NA |
| Beta | NA |
| Dividend / Div Yld | NA |
| Industry | NA |
| Zacks Industry Rank | NA |
| Last EPS Surprise | NA |
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| Last Sales Surprise | NA |
| EPS F1 Est- 4 week change | NA |
| Expected Report Date | NA |
| Earnings ESP | 0.0% |
| P/E TTM | NA |
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| P/E F1 | NA |
| PEG F1 | NA |
| P/S TTM | NA |
Price, Consensus & Surprise(1)
Sales and EPS Growth Rates (Y/Y %)(2)
Sales  |
EPS  |
1) The data in the charts and tables, including the Zacks Consensus EPS and sales estimates, is as of .
2) The report's text and the price target are as of 08/02/2022.
Overview
As of
CNH Industrial is one of the leading equipment and services company engaged in manufacture and sale of agricultural and construction equipment. Currently, CNH Industrial has a commercial presence in approximately 180 countries.
Effective January 1, 2022, the Iveco Group business —which was engaged in the production and distribution of trucks, commercial vehicles, buses and specialty vehicles—was separated from CNH Industrial by way of a demerger. CNH Industrial has separated its ‘On-Highway’ and ‘Off-Highway’ businesses.
Its Off-Highway business include Agriculture Equipment and Construction Equipment units.
Agricultural Equipment: The segment engages in designing, manufacturing and distribution of farm machinery. Its products include two-wheel and four-wheel drive tractors, and crawler tractors, among others. The segment offers products under the brand names — New Holland, Case IH, with the STEYR brand in Europe and Miller brand majorly in North America. The segment generated revenues of $14.7 billion in 2021.
Construction Equipment: The segment designs, manufactures and distributes construction equipment, including excavators, graders wheel loaders, crawler dozers, backhoe loaders, compact track loaders and telehandlers. Its products are offered through Case Construction Equipment and New Holland Construction brand names, under New Holland. The segment generated revenues of $3.1 billion in 2021.
Coming to its Financial Services segment, prior to the demerger, CNH Industrial offered a range of financial products and services to dealers and customers of both Off-Highway and On-Highway Industrial Activities segments. Following the demerger, the European operations of CNH Industrial Financial Services will be separated as follows: the receivable portfolios related to the captive activity of each group (CNH Industrial and Iveco Group), together with the related funding, will be attributed to each group, while the servicing of these separated portfolios will be performed by Iveco Group’s Financial Services segment. CNH Industrial will provide financial services to Iveco Group companies in the rest of the world.
As of
Reasons To Buy:
Raven Industries and Sampierana buyouts are set to bolster the prospects of CNH Industrial's Agriculture and Construction segments, respectively.
CNH Industrial’s state-of-the-art and productivity-boosting agricultural product portfolio is set to boost prospects. The company expects its agriculture to perform well in 2022 as well. Acquisition of Raven Industries has significantly augmented CNH Industrial’s precision agriculture capabilities. CNH Industrial's strong engineering expertise would leverage Raven's technology to introduce best-in-class products and solutions, thereby delivering enhanced productivity and yields.
CNH Industrial’s construction segment is getting a boost from the addition of Sampierana, which is a construction equipment company specializing in developing earthmoving machines, particularly with mini and mini excavators. The Sampierana acquisition has been pivotal in accelerating profitable growth in Europe, where there were market share gains in all major product categories aside from large excavators. Their Eurocomach product range will drastically bolster CNH Industrial’s construction equipment portfolio, thereby leading to significant improvements in products and technologies.
The introduction of the New Holland T6 Methane tractor in the United States demonstrates the firm’s progress toward sustainable farming practices. CNH Industrial also opened a new advanced engineering center in Scottsdale, AZ, that focuses on artificial intelligence and data science for its autonomous vehicle platforms and precision agriculture applications. This has boosted the company’s software development capability.
The company is developing several products and technologies across all segments to remain on par with the latest technological advancements and emission-control procedures. Upgraded product offerings will aid the company in achieving new business contracts. Favorable pricing and higher demand across both agriculture and construction units will aid the company’s top line. CNH Industrial expects net sales from industrial activities (including currency-translation effects) for 2022 to increase in the band of 12-14% year over year instead of 10-14%.
Reasons To Sell:
Elevated debt-to-capital ratio, high capex and surging input and logistics costs are major causes of concern for CNH Industrial.
CNH Industrial’s debt levels of $20.8 billion are huge compared to cash and cash equivalents of $2.8 billion. The firm’s liquidity at the end of Q2’22 stood at $8.8 billion, down from $10.5 billion from Dec 31, 2021. Its total debt-to-capital ratio stands at 0.78, higher than its industry's 0.29. The high leverage, both in absolute and relative terms, restricts the firm’s financial flexibility to tap onto growth opportunities.
CNH Industrial's 2022 FCF projection of $1 billion compares unfavorably with $1.9 billion recorded in 2021. Rising capital expenditure to develop advanced products and technologies might mar the firm’s near-term margins. For the reported quarter, FCF came at $404 million, down from $785 million in the year-ago period due to elevated factory inventory. Notably, R&D expenses and capex are projected at around $1.4 billion, rising from $1 billion in 2021.
The Ukraine war has left a deep impact on food supplies, leading to volatility in commodity prices and various farm input costs. Crop commodity prices remain volatile. Also, the conflict and currency devaluation in Turkey have forced CNHI to narrow its projection for tractor demand in the EMEA region. CNH Industrial anticipates lower agricultural equipment sales in Russia, Turkey and Ukraine, which would induce lost sales. Farmer sentiment weakened due to increased pressure on the cost and availability of fertilizers. CNHI’s order backlog for new equipment continues to grow, straining the agricultural unit.
The company estimates component shortages and the Ukrainian conflict to affect production and inventory levels, thereby limiting revenues and cash flows. Supply chain constraints continued to hamper its production capacity in the second quarter. Dealer inventories of new equipment remained quite lean, especially in North America for row crop machinery and in Europe, where supply constraints are most critical. Surging raw material prices and freight and logistics costs are likely to clip margins to a certain extent. In fact, the company estimates the impact of raw material cost increases, freight costs and other supply chain constraints to remain headwinds for 2022 as well, offsetting a large chunk of the positive price realization. Rising interest rates and inflation along with the re-imposition of widespread lockdown in China, are just adding to the woes.
Last Earnings Report
FY Quarter Ending |
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| Earnings Reporting Date | NA |
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| Sales Surprise | NA |
| EPS Surprise | NA |
| Quarterly EPS | NA |
| Annual EPS (TTM) | NA |
CNH Industrial Q2 Earnings Beat
CNH Industrial posted second-quarter 2022 adjusted earnings per share of 43 cents, which increased 16.2% from 37 cents in the prior-year quarter and topped the Zacks Consensus Estimate of 37 cents. Higher-than-anticipated revenues across the Agricultural Equipment and the Financial Services segments resulted in this outperformance.
In the second quarter, consolidated revenues rose 18% from the year-ago level to $6,082 million and topped the consensus mark of $5,859 million. The company’s net sales for industrial activities came in at $5,613 million, up 18%, led by favorable pricing.
Segmental Performance
In the June quarter, net sales in the Agricultural Equipment segment jumped 19% year over year to $4,722 million due to a favorable price realization and mix mainly driven by the North America and South America regions. The metric also topped the Zacks Consensus Estimate of $4,454 million. The segment’s adjusted EBIT came in at $663 million, rising 13.9% year over year and driven by higher gross profit and topping the consensus mark of $631 million. The adjusted EBIT margin however, decreased to 14% from 14.7% amid increased selling, general & administrative (SG&A) and research & development (R&D).
The Construction Equipment segment’s sales grew 10% year over year to $891 million in the quarter, led by price realization and contribution from the Sampierana business. But, revenues missed the Zacks Consensus Estimate of $892 million. Adjusted EBIT came in at $34 million, gaining 41.2% on the back of favorable volume and a positive price realization. Nonetheless, the figure nominally lagged the consensus mark of $34.16 million. The adjusted EBIT margin fell to 3.8% from 3% in the year-ago quarter amid unfavorable fixed costs absorption and higher freight and raw material costs.
The Financial Services segment revenues went up 20% to $471 million and topped the consensus mark of $427 million on higher used equipment sales, base rates in South America and average portfolios across all regions. Net income from the segment jumped 11.8% to $95 million.
Financial Details
CNH Industrial had cash and cash equivalents of $2,855 million as of Jun 30, 2022, down from $5,044 million as of Dec 31, 2021. The company’s debt totaled $20,817 million at the end of the second quarter of 2022, down from $20,897 million as of Dec 31, 2021. The firm had available liquidity of $8,795 million as of Jun 30, 2022.
CNH Industrial’s net cash used in operating activities was $271 million against net cash of $999 million provided by operating activities in the previous-year quarter. Free cash flow from industrial activities was $404 million in the quarter.
During the quarter, the company received proceeds of $350 million for the sale of the Raven Engineered Films Division. Also, it approved a $300 million share buyback program to be launched at the completion of the existing $100 million program.
2022 Guidance
CNH Industrial has revised its estimates for net sales from industrial activities (including currency-translation effects) for 2022. Sales are now expected to increase year over year in the band of 12-14% instead of 10-14% guided earlier. Its projections for free cash flow remains unchanged and it continues to expect to generate more than $1 billion in free cash flow from industrial activities in 2022. R&D expenses and capex projections also remain the same at around $1.4 billion. SG&A expenses remain projected at lower or equal to 7.5% of net sales.
Valuation
CNH Industrial's shares are down 36% and 26.2% year to date and in the trailing 12-month period, respectively. Stocks in the Zacks Automotive – Foreign industry and the Zacks Auto-Tires-Trucks sector are down 20% and 21.8%, respectively, year to date. Over the past year the Zacks sub industry and sector are down 30.7% and 13.8%, respectively.
The S&P 500 index is down 13.6% and 7.2% year to date and in the past year, respectively.
The stock is currently trading at 8.72X forward 12-month earnings, which compares to 9.73X for the Zacks sub-industry, 20.93X for the Zacks sector and 17.91X for the S&P 500 index.
Over the past five years, the stock has traded as high as 59.4X and as low as 6.39X, with a 5-year median of 12.85X. Our Neutral recommendation indicates that the stock will perform in line with the market. Our $13 price target reflects 9.1X forward 12-month earnings per share.
The table below shows summary valuation data for CNHI:
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Industry Analysis(1)Zacks Industry Rank: NA
Industry Comparison(1)Industry: NA |
Industry Peers |
| CNHI | |
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| Zacks Recommendation (Long Term) | NA |
| Zacks Rank (Short Term) | NA |
| VGM Score | NA |
| Market Cap | NA |
| # of Analysts | NA |
| Dividend Yield | NA |
| Value Score | NA |
| Cash/Price | NA |
| EV/EBITDA | NA |
| PEG Ratio | NA |
| Price/Book (P/B) | NA |
| Price/Cash Flow (P/CF) | NA |
| P/E (F1) | NA |
| Price/Sales (P/S) | NA |
| Earnings Yield | NA |
| Debt/Equity | NA |
| Cash Flow ($/share) | NA |
| Growth Score | NA |
| Hist. EPS Growth (3-5 yrs) | NA |
| Proj. EPS Growth (F1/F0) | NA |
| Curr. Cash Flow Growth | NA |
| Hist. Cash Flow Growth (3-5 yrs) | NA |
| Current Ratio | NA |
| Debt/Capital | NA |
| Net Margin | NA |
| Return on Equity | NA |
| Sales/Assets | NA |
| Proj. Sales Growth (F1/F0) | NA |
| Momentum Score | NA |
| Daily Price Chg | NA |
| 1 Week Price Chg | NA |
| 4 Week Price Chg | NA |
| 12 Week Price Chg | NA |
| 52 Week Price Chg | NA |
| 20 Day Average Volume | NA |
| (F1) EPS Est 1 week change | NA |
| (F1) EPS Est 4 week change | NA |
| (F1) EPS Est 12 week change | NA |
| (Q1) EPS Est Mthly Chg | NA |
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Zacks Stock Rating System
We offer two rating systems that take into account investors' holding horizons: Zacks Rank and Zacks Recommendation. Each provides valuable insights into the future profitability of the stock and can be used separately or in combination with each other depending on your investment style.
Zacks Recommendation
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Zacks Rank
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Disclosures
This report contains independent commentary to be used for informational purposes only. The analysts contributing to this report do not hold any shares of this stock. The analysts contributing to this report do not serve on the board of the company that issued this stock. The EPS and revenue forecasts are the Zacks Consensus estimates, unless otherwise indicated in the report’s first-page footnote. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts' personal views as to the subject securities and issuers. ZIR certifies that no part of the analysts' compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report.
Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Any opinions expressed herein are subject to change.
ZIR is not an investment advisor and the report should not be construed as advice designed to meet the particular investment needs of any investor. Prior to making any investment decision, you are advised to consult with your broker, investment advisor, or other appropriate tax or financial professional to determine the suitability of any investment. This report and others like it are published regularly and not in response to episodic market activity or events affecting the securities industry.
This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. ZIR or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. ZIR is not a broker-dealer. ZIR may enter into arms-length agreements with broker-dealers to provide this research to their clients. Zacks and its staff are not involved in investment banking activities for the stock issuer covered in this report.
ZIR uses the following rating system for the securities it covers. Outperform- ZIR expects that the subject company will outperform the broader U.S. equities markets over the next six to twelve months. Neutral- ZIR expects that the company will perform in line with the broader U.S. equities markets over the next six to twelve months. Underperform- ZIR expects the company will underperform the broader U.S. equities markets over the next six to twelve months.
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