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CNH (CNHI) Up 4.7% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for CNH Industrial (CNHI - Free Report) . Shares have added about 4.7% 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 its most recent earnings report in order to get a better handle on the important catalysts.

CNH Industrial Posts Impressive Q4 Results

CNH Industrial posted fourth-quarter 2020 adjusted earnings per share of 30 cents, increasing 50% year over year and comfortably surpassing the Zacks Consensus Estimate of 15 cents. Higher-than-anticipated revenues from industrial activities (comprising Agricultural Equipment, Construction Equipment, Commercial and Specialty vehicles, and Powertrain segments) resulted in this outperformance.

For the fourth quarter, consolidated revenues climbed 10.5% from the year-ago level to $8,501 million and topped the consensus mark of $7,659 million. The company’s net sales for industrial activities came in at $8,035 million, up 11.8% year on year.

Segmental Performance

For the December-end quarter, net sales in the Agricultural Equipment segment climbed 17% year over year to $3,425 million. The metric also surpassed the Zacks Consensus Estimate of $3,086 million. Moreover, the segment’s adjusted EBIT came in at $379 million, soaring 60.5% from the year-ago quarter on higher volumes, positive price realization, and reduced SG&A expenses.

The Construction Equipment segment’s sales scaled up 6.4% year over year to $752 million for fourth-quarter 2020. Revenues from the unit also outpaced the Zacks Consensus Estimate of $676 million. Adjusted EBIT came in at $10 million, up 233.3% year over year on the back of favorable volume and mix, as well as persistent focus on operational efficiency.

Revenues in Commercial and Specialty vehicles increased 9.8% year on year to $3,290 million, beating the consensus mark of $2,283 million. Adjusted EBIT skyrocketed from $3 million in fourth-quarter 2019 to $110 million for the quarter under review. This upside primarily stemmed from positive price realization and favorable product mix, especially in Europe and South America.

The Powertrain segment’s quarterly revenues jumped 19.4% year over year to $1,204 million. The reported figure also topped the consensus estimate of $958 million. Adjusted EBIT was $110 million, up 30.9% year over year amid lower regulatory expenses and favorable volume mix.

The Financial Services segment revenues dropped 8.7% year over year to $485 million for the fourth quarter due to forex losses and lower average portfolio in North America. The reported figure also missed the consensus mark of $611 million. Net income from the segment plunged 35.5% from the prior-year quarter to $60 million.

Financial Details

CNH Industrial had cash and cash equivalents of $8,785 million as of Dec 31, 2020 compared with $4,875 million in the corresponding period of 2019. The company’s debt increased to $26,053 million as of Dec 31, 2020 from $24,854 million in the comparable period of 2019. The firm had available liquidity of $15,871 million as of Dec 31, 2020 compared with $11,305 million in the same period last year.

CNH Industrial’s cash provided by operating activities was $2,644 million during the reported quarter compared with $2,028 million in the prior-year period. Free cash flow (FCF) from industrial activities came in at $2,365 million for the fourth quarter, up from $1,711 million recorded in the prior-year period.

2021 View

CNH Industrial expects net sales from industrial activities (including currency-translation effects) for 2021 to increase 8-12% year on year. The company envisions FCF from industrial activities for the ongoing year within $0.4-$0.8 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 200% due to these changes.

VGM Scores

At this time, CNH has a strong Growth Score of A, a grade with the same score on the momentum front. Following the exact same course, 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been 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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