It has been about a month since the last earnings report for CNH Industrial . Shares have lost about 7.6% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
CNH Industrial's Q4 Earnings Fall Y/Y But Beats Estimates
CNH Industrial posted fourth-quarter 2021 adjusted earnings per share of 25 cents. The bottom line decreased from 30 cents in the prior-year quarter but surpassed the Zacks Consensus Estimate of 21 cents. Higher-than-anticipated revenues and EBIT across the Agricultural Equipment and the Construction Equipment segments resulted in this outperformance.
In the fourth quarter, consolidated revenues climbed around 7% from the year-ago level to $9,072 million and topped the consensus mark of $7,983.3 million. The company’s net sales for industrial activities came in at $8,552 million, up 6.4% year on year.
Segmental Performance
In the December quarter, net sales in the Agricultural Equipment segment jumped 21.2% year over year to $4,150 million due to a demand boost and favorable price realization. The metric also surpassed the Zacks Consensus Estimate of $3,083 million. The segment’s adjusted EBIT came in at $414 million, up $35 million year over year and topped the consensus mark of $308 million. The adjusted EBIT margin decreased to 10% from 11.1% amid an unfavorable mix and higher raw material and freight as well as increased selling, general & administrative (SG&A) and research & development (R&D) spend.
The Construction Equipment segment’s sales grew 12.2% year over year to $844 million in fourth-quarter 2021, led by favorable price realization, higher demand and lower destocking by dealers and distributors. Revenues from the unit also outpaced the Zacks Consensus Estimate of $564 million. Adjusted EBIT came in at $20 million, doubling from the prior-year figure and topping the consensus mark of $8 million, on the back of favorable volume and better price realization. The adjusted EBIT margin increased to 2.4% from 1.3% in the year-ago quarter. The performance was aided by positive price realization and favorable volume and mix.
Revenues in Commercial and Specialty vehicles slid down 1% year over year to $3,256 million in the fourth quarter, affected by unfavorable currency translation. The reported figure, however, topped the consensus mark of $3,043 million. Adjusted EBIT came down to $55 million from $110 million reported in the prior-year period and missed the consensus figure of $99 million. The adjusted EBIT margin decreased to 1.7% from 3.3% in the year-ago quarter. This performance primarily stemmed from higher raw material costs and higher freight, rework costs due to component shortages and R&D spending.
The Powertrain segment’s quarterly revenues came down to $945 million, contracting 21.5% year over year due to lower deliveries to external customers. The reported figure also lagged the consensus mark of $1,096 million. Adjusted EBIT from the segment declined to $23 million from $87 million amid high freight, commodity and raw material costs. The figure missed the consensus estimate of $82 million. The adjusted EBIT margin decreased to 2.4% from 9.1% in the year-ago quarter.
The Financial Services segment revenues went up to $533 million, increasing around 10% year over year. The reported figure also topped the consensus mark of $497 million. Net income from the segment jumped 86.6% to $112 million, primarily on lower risk costs and improved pricing on used-equipment sales.
Financial Details
CNH Industrial had cash and cash equivalents of $6,006 million as of Dec 31, 2021. The company’s debt totaled $23,745 million at the end of the fourth quarter of 2021, decreasing around 9% from the year-ago quarter. The firm had available liquidity of $12,149 million as of Dec 31, 2021, compared with $15,871 million at 2020-end.
CNH Industrial’s cash provided by operating activities was $2,190 million during the reported quarter, down from $2,766 in the previous-year quarter. Free cash flow from industrial activities came in at $1,842 million in the fourth quarter.
2022 Guidance
CNH Industrial expects net sales from industrial activities (including currency-translation effects) for 2022 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 estimates revision.
The consensus estimate has shifted -18.39% due to these changes.
VGM Scores
At this time, CNH has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. 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 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 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.
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Why Is CNH (CNHI) Down 7.6% Since Last Earnings Report?
It has been about a month since the last earnings report for CNH Industrial . Shares have lost about 7.6% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
CNH Industrial's Q4 Earnings Fall Y/Y But Beats Estimates
CNH Industrial posted fourth-quarter 2021 adjusted earnings per share of 25 cents. The bottom line decreased from 30 cents in the prior-year quarter but surpassed the Zacks Consensus Estimate of 21 cents. Higher-than-anticipated revenues and EBIT across the Agricultural Equipment and the Construction Equipment segments resulted in this outperformance.
In the fourth quarter, consolidated revenues climbed around 7% from the year-ago level to $9,072 million and topped the consensus mark of $7,983.3 million. The company’s net sales for industrial activities came in at $8,552 million, up 6.4% year on year.
Segmental Performance
In the December quarter, net sales in the Agricultural Equipment segment jumped 21.2% year over year to $4,150 million due to a demand boost and favorable price realization. The metric also surpassed the Zacks Consensus Estimate of $3,083 million. The segment’s adjusted EBIT came in at $414 million, up $35 million year over year and topped the consensus mark of $308 million. The adjusted EBIT margin decreased to 10% from 11.1% amid an unfavorable mix and higher raw material and freight as well as increased selling, general & administrative (SG&A) and research & development (R&D) spend.
The Construction Equipment segment’s sales grew 12.2% year over year to $844 million in fourth-quarter 2021, led by favorable price realization, higher demand and lower destocking by dealers and distributors. Revenues from the unit also outpaced the Zacks Consensus Estimate of $564 million. Adjusted EBIT came in at $20 million, doubling from the prior-year figure and topping the consensus mark of $8 million, on the back of favorable volume and better price realization. The adjusted EBIT margin increased to 2.4% from 1.3% in the year-ago quarter. The performance was aided by positive price realization and favorable volume and mix.
Revenues in Commercial and Specialty vehicles slid down 1% year over year to $3,256 million in the fourth quarter, affected by unfavorable currency translation. The reported figure, however, topped the consensus mark of $3,043 million. Adjusted EBIT came down to $55 million from $110 million reported in the prior-year period and missed the consensus figure of $99 million. The adjusted EBIT margin decreased to 1.7% from 3.3% in the year-ago quarter. This performance primarily stemmed from higher raw material costs and higher freight, rework costs due to component shortages and R&D spending.
The Powertrain segment’s quarterly revenues came down to $945 million, contracting 21.5% year over year due to lower deliveries to external customers. The reported figure also lagged the consensus mark of $1,096 million. Adjusted EBIT from the segment declined to $23 million from $87 million amid high freight, commodity and raw material costs. The figure missed the consensus estimate of $82 million. The adjusted EBIT margin decreased to 2.4% from 9.1% in the year-ago quarter.
The Financial Services segment revenues went up to $533 million, increasing around 10% year over year. The reported figure also topped the consensus mark of $497 million. Net income from the segment jumped 86.6% to $112 million, primarily on lower risk costs and improved pricing on used-equipment sales.
Financial Details
CNH Industrial had cash and cash equivalents of $6,006 million as of Dec 31, 2021. The company’s debt totaled $23,745 million at the end of the fourth quarter of 2021, decreasing around 9% from the year-ago quarter. The firm had available liquidity of $12,149 million as of Dec 31, 2021, compared with $15,871 million at 2020-end.
CNH Industrial’s cash provided by operating activities was $2,190 million during the reported quarter, down from $2,766 in the previous-year quarter. Free cash flow from industrial activities came in at $1,842 million in the fourth quarter.
2022 Guidance
CNH Industrial expects net sales from industrial activities (including currency-translation effects) for 2022 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 estimates revision.
The consensus estimate has shifted -18.39% due to these changes.
VGM Scores
At this time, CNH has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. 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 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 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.