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Here's Why You Should Retain CNH Stock in Your Portfolio
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Key Takeaways
CNH underproduces retail demand to cut dealer inventories, positioning for a built-in volume benefit in 2027.
Aging fleets, healthier channel conditions and precision technology investments support replacement demand.
Tariffs, freight costs and weak South American demand continue to pressure margins.
CNH Industrial (CNH - Free Report) is poised to benefit from aging equipment fleets, improving dealer inventories, positive price-cost and cost-saving initiatives, while Precision Technology investments offer long-term growth potential. However, weak South American and European demand, higher freight costs and tariffs continue to pressure margins.
Let’s dig deeper and see why this Zacks Rank #3 (Hold) stock is worth retaining in your portfolio.
Aging Equipment Fleet & Inventory Optimization Aid CNH
CNH Industrial continues to invest in automation, autonomy, digital tools, alternative fuels and electrification to expand its Precision Technology offering. Adoption of connected and AI-enabled solutions across the installed base and dealer network is on the rise. FieldOps expansion and Raven integration support broader machine connectivity, while prior plans call for greater machinery compatibility and enhanced remote display functions in 2026. The company also planned FLEETPRO aftermarket kits in EMEA. These initiatives support a broader goal of increasing technology content in Agriculture, with 30 precision technology launches planned between February 2026 and the end of 2027.
CNH continues to manage the downturn through low production, channel inventory reductions and cost programs. Dealer inventories were slightly lower sequentially in the second quarter of 2026, and the company still targets another $400 million to $500 million reduction by year-end, with most of the decrease weighted to the fourth quarter. Agriculture price-cost remained positive in the quarter and is expected to stay positive for full-year 2026. As of the second quarter of 2026, strategic sourcing Wave 1 was delivering, while Wave 2 is expected to contribute in 2027. CNH targets 100 to 150 basis points of Agriculture margin improvement from sourcing alone by 2030.
Equipment fleets continue to age while dealer inventories of new and used machines normalize across major regions. In second-quarter 2026, the price gap between new and used equipment had begun to converge after several years of divergence, a change it views as necessary for more economical replacement transactions. These cycle indicators are advancing even though farmer profitability remains weak. CNH’s baseline view is for an L-shaped recovery, with 2027 retail demand broadly flat and replacement demand carrying much of the market. That outlook is more cautious than a broad cyclical rebound, but the aging installed base and healthier channel conditions provide underlying support for demand through the trough.
CNH is underproducing 2026 retail demand by about 4% as it works to reduce dealer inventories. It expects production to move closer to retail demand in 2027 if industry retail demand remains broadly flat, creating a built-in volume benefit without requiring a market rebound. Price-cost has remained positive in Agriculture, while sourcing, quality and factory efficiency initiatives are expected to continue contributing. The company expects that, under a flat-industry scenario, these factors support a 2027 earnings outcome that is no lower than 2026.
CNH continues to return cash to shareholders while supporting its dealer network. In the second quarter of 2026, it paid $126 million in dividends and repurchased $36 million of shares. As of June 30, 2026, shares worth $187.1 million remain under its current repurchase authorization.
Weakness in South America & Rising Debt Ail CNH
Tariffs remain a margin burden despite relief. CNH now expects the 2026 impact to reduce Agriculture margins by about 170 basis points and Construction margins by 470 basis points. The 2027 run-rate impact remains about 150 and 450 basis points, respectively.
South America remains a major pressure point for CNH. Agriculture sales in the region declined 27% in the second quarter, while Construction conditions were also challenging. Financial Services is facing higher risk costs in Brazil, and delinquency rates increased year over year. At the same time, EMEA, previously viewed as a relative bright spot, weakened unexpectedly because of drought conditions, weaker farmer sentiment and higher input costs. Dealer inventories also increased in EMEA as retail demand came in softer than expected. With South America already under pressure and Europe showing signs of deterioration, CNH faces the risk that weakness spreads across additional regions and delays a broader industry recovery.
Higher freight and transportation costs are offsetting part of the benefit from lower Section 232 tariff rates. Shipping-lane disruptions are a recent source of additional cost, and the tariff relief in Agriculture has been largely offset by freight increases and continued weakness in South America. These costs arrive while Agriculture adjusted EBIT margin is guided to 5% to 5.5% for 2026, down from 6.02% in 2025. CNH has not passed all tariff costs to customers, which limits the immediate pricing offset. Continued logistics disruption could therefore keep cost recovery uneven even as tariff rates moderate.
Industrial Activities net debt totaled $2.52 billion as of June 30, 2026, up from $2.03 billion as of Dec. 31, 2025. Its long-term debt-to-capital ratio stands at 77% compared to the sector’s ratio of 49%. High debt restricts the firm’s financial flexibility.
Price Performance, Valuation and Estimates
CNH has underperformed the Zacks Machinery-Farm Market industry in the last six months. Its shares have lost 5.8% compared to the industry’s decline of 1.5%.
Image Source: Zacks Investment Research
From a valuation perspective, CNH appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.77, lower than the industry’s 5.45.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CNH’s 2026 EPS has improved 4 cents in the past 30 days, while for 2027 it improved by a penny in the past seven days.
The Zacks Consensus Estimate for Helios Technologies’ 2026 earnings is pegged at $3.19 per share. The company has a trailing four-quarter average earnings surprise of 13.13%.
The Zacks Consensus Estimate for FAST’s 2026 earnings is pinned at $1.26 per share, which indicates year-over-year growth of 15.6%. The EPS estimate for 2026 and 2027 has improved by a penny each over the past 30 days.
View the Zacks #1 Rank List
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Here's Why You Should Retain CNH Stock in Your Portfolio
Key Takeaways
CNH Industrial (CNH - Free Report) is poised to benefit from aging equipment fleets, improving dealer inventories, positive price-cost and cost-saving initiatives, while Precision Technology investments offer long-term growth potential. However, weak South American and European demand, higher freight costs and tariffs continue to pressure margins.
Let’s dig deeper and see why this Zacks Rank #3 (Hold) stock is worth retaining in your portfolio.
Aging Equipment Fleet & Inventory Optimization Aid CNH
CNH Industrial continues to invest in automation, autonomy, digital tools, alternative fuels and electrification to expand its Precision Technology offering. Adoption of connected and AI-enabled solutions across the installed base and dealer network is on the rise. FieldOps expansion and Raven integration support broader machine connectivity, while prior plans call for greater machinery compatibility and enhanced remote display functions in 2026. The company also planned FLEETPRO aftermarket kits in EMEA. These initiatives support a broader goal of increasing technology content in Agriculture, with 30 precision technology launches planned between February 2026 and the end of 2027.
CNH continues to manage the downturn through low production, channel inventory reductions and cost programs. Dealer inventories were slightly lower sequentially in the second quarter of 2026, and the company still targets another $400 million to $500 million reduction by year-end, with most of the decrease weighted to the fourth quarter. Agriculture price-cost remained positive in the quarter and is expected to stay positive for full-year 2026. As of the second quarter of 2026, strategic sourcing Wave 1 was delivering, while Wave 2 is expected to contribute in 2027. CNH targets 100 to 150 basis points of Agriculture margin improvement from sourcing alone by 2030.
Equipment fleets continue to age while dealer inventories of new and used machines normalize across major regions. In second-quarter 2026, the price gap between new and used equipment had begun to converge after several years of divergence, a change it views as necessary for more economical replacement transactions. These cycle indicators are advancing even though farmer profitability remains weak. CNH’s baseline view is for an L-shaped recovery, with 2027 retail demand broadly flat and replacement demand carrying much of the market. That outlook is more cautious than a broad cyclical rebound, but the aging installed base and healthier channel conditions provide underlying support for demand through the trough.
CNH is underproducing 2026 retail demand by about 4% as it works to reduce dealer inventories. It expects production to move closer to retail demand in 2027 if industry retail demand remains broadly flat, creating a built-in volume benefit without requiring a market rebound. Price-cost has remained positive in Agriculture, while sourcing, quality and factory efficiency initiatives are expected to continue contributing. The company expects that, under a flat-industry scenario, these factors support a 2027 earnings outcome that is no lower than 2026.
CNH continues to return cash to shareholders while supporting its dealer network. In the second quarter of 2026, it paid $126 million in dividends and repurchased $36 million of shares. As of June 30, 2026, shares worth $187.1 million remain under its current repurchase authorization.
Weakness in South America & Rising Debt Ail CNH
Tariffs remain a margin burden despite relief. CNH now expects the 2026 impact to reduce Agriculture margins by about 170 basis points and Construction margins by 470 basis points. The 2027 run-rate impact remains about 150 and 450 basis points, respectively.
South America remains a major pressure point for CNH. Agriculture sales in the region declined 27% in the second quarter, while Construction conditions were also challenging. Financial Services is facing higher risk costs in Brazil, and delinquency rates increased year over year. At the same time, EMEA, previously viewed as a relative bright spot, weakened unexpectedly because of drought conditions, weaker farmer sentiment and higher input costs. Dealer inventories also increased in EMEA as retail demand came in softer than expected. With South America already under pressure and Europe showing signs of deterioration, CNH faces the risk that weakness spreads across additional regions and delays a broader industry recovery.
Higher freight and transportation costs are offsetting part of the benefit from lower Section 232 tariff rates. Shipping-lane disruptions are a recent source of additional cost, and the tariff relief in Agriculture has been largely offset by freight increases and continued weakness in South America. These costs arrive while Agriculture adjusted EBIT margin is guided to 5% to 5.5% for 2026, down from 6.02% in 2025. CNH has not passed all tariff costs to customers, which limits the immediate pricing offset. Continued logistics disruption could therefore keep cost recovery uneven even as tariff rates moderate.
Industrial Activities net debt totaled $2.52 billion as of June 30, 2026, up from $2.03 billion as of Dec. 31, 2025. Its long-term debt-to-capital ratio stands at 77% compared to the sector’s ratio of 49%. High debt restricts the firm’s financial flexibility.
Price Performance, Valuation and Estimates
CNH has underperformed the Zacks Machinery-Farm Market industry in the last six months. Its shares have lost 5.8% compared to the industry’s decline of 1.5%.
Image Source: Zacks Investment Research
From a valuation perspective, CNH appears undervalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 0.77, lower than the industry’s 5.45.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for CNH’s 2026 EPS has improved 4 cents in the past 30 days, while for 2027 it improved by a penny in the past seven days.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Helios Technologies, Inc (HLIO - Free Report) and Fastenal Company (FAST - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Helios Technologies’ 2026 earnings is pegged at $3.19 per share. The company has a trailing four-quarter average earnings surprise of 13.13%.
The Zacks Consensus Estimate for FAST’s 2026 earnings is pinned at $1.26 per share, which indicates year-over-year growth of 15.6%. The EPS estimate for 2026 and 2027 has improved by a penny each over the past 30 days.