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CNH (CNHI) Up 8.4% 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 8.4% 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 Posts Impressive Q1 Results

CNH Industrial posted first-quarter 2021 adjusted earnings per share of 32 cents, surpassing the Zacks Consensus Estimate of 15 cents. The bottom line turned around from the year-ago loss of 6 cents a share. Higher-than-anticipated revenues and profits from industrial activities (comprising Agricultural Equipment, Construction Equipment, Commercial and Specialty vehicles as well as Powertrain segments) resulted in this outperformance.

For the first quarter, consolidated revenues climbed 36.8% from the year-ago level to $7,473 million and topped the consensus mark of $6,783 million. The company’s net sales for industrial activities came in at $7,043 million, up 41% year on year.

Segmental Performance

For the March-end quarter, net sales in the Agricultural Equipment segment climbed 35.4% year over year to $3,038 million. The metric also surpassed the Zacks Consensus Estimate of $3,023 million. Moreover, the segment’s adjusted EBIT came in at $399 million, jumping from $24 million recorded in the prior-year quarter. The upside was driven by higher volumes, positive price realization and favorable mix. The metric also surpassed the consensus mark of $363 million.

The Construction Equipment segment’s sales scaled up 55.5% year over year to $656 million for first-quarter 2021. Revenues from the unit also outpaced the Zacks Consensus Estimate of $512 million. Adjusted EBIT came in at $25 million versus the loss estimate of $10 million. The metric also turned around from a loss of $83 million incurred in the year-ago period on the back of favorable volume and mix along with positive price realization.

Revenues in Commercial and Specialty vehicles increased 38.8% year on year to $2,805 million, beating the consensus mark of $2,306 million. The segment swung from a loss of 56 million to pretax profit of $76 million for the quarter under review and topped the consensus mark of $58 million. This upside primarily stemmed from positive price realization and higher volumes.

The Powertrain segment’s quarterly revenues jumped 63.9% year over year to $1,234 million. The reported figure also outpaced the consensus estimate of $886 million. Adjusted EBIT was $115 million, up a whopping 270% year over year, thanks to favorable volume mix.

The Financial Services segment revenues dropped 8.4% year over year to $448 million for the first quarter due to a decline in off-lease equipment sales and lower average portfolio in North America. The reported figure also missed the consensus mark of $499 million. Net income from the segment rose 13.7% from the prior-year quarter to $91 million on the back of lower risk costs and favorable retail margin in North America.

Financial Details

CNH Industrial had cash and cash equivalents of $7,059 million as of Mar 31, 2021 compared with $8,785 million on Dec 31, 2020. The company’s debt decreased to $23,805 million as of Mar 31, 2021 from $26,053 million at 2020-end. The firm had available liquidity of $13,886 million as of Mar 31, 2021 compared with $15,871 million on Dec 31, 2020. Free cash flow (FCF) from industrial activities was negative $371 million for the quarter under review.

2021 View

CNH Industrial now expects net sales from industrial activities (including currency-translation effects) for 2021 to increase 14-18% year over year, up from the prior guided range of 8-12%. The company envisions FCF from industrial activities for the ongoing year within $0.6-$1 billion, higher than the previous forecast of $0.4-$0.8 billion.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted 17.1% due to these changes.

VGM Scores

At this time, CNH has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% 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 broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, CNH has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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