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CNH Industrial Gains on Robust Demand, Better Product Pricing

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On Sep 3, we issued an updated research report on CNH Industrial N.V. (CNHI - Free Report) .

In second-quarter 2018, the company witnessed a year-over-year increase in revenues and adjusted earnings per share. Moreover, both earnings and revenues surpassed the respective Zacks Consensus Estimate. Further, all the industrial segments witnessed year-over-year gain, driven by positive price realization and improved market demand.

A similar trend is anticipated to continue for the rest of 2018 as well. This has encouraged CNH Industrial to raise its expectation for adjusted diluted earnings per share to 67-71 cents compared with the previous projection of 65-67 cents for 2018.

CNH Industrial N.V. Price and Consensus

The demand for the company’s agricultural equipment is improving across regions and majorly in NAFTA (constituting the United States, Canada and Mexico). In the last-reported quarter, the segment’s NAFTA sales grew 9% for high horsepower tractors and 26% for combine harvesters. Restocking inventories, replacing old equipment with region’s row crop production, has led to this sales increase. Moreover, to sync with emission regulations and cater to farming requirements in the long term, CNH Industrial is investing in various product development programs.

Another major sales-generating segment, Commercial Vehicles is also gaining businesses, majorly across EMEA and LATAM regions. Moreover, the demand for light commercial vehicle market in Europe is anticipated to grow at a CAGR of 3.6% through 2021. This growth rate will further strengthen the company’s Commercial Vehicles segment.

However, rising expenses, due to increased R&D expenses and raw material costs to develop products, are partly offsetting the company’s profit margin. In second-quarter 2018, CNH Industrial’s total costs and expenses rose almost 13% to $7.5 billion from the prior-year quarter.

Price Performance

In the past three months, CNH Industrial’s stock has gained 2.8%, outperforming 8.7% decline recorded by the industry it belongs to.

 



Zacks Rank & Key Picks

CNH Industrial currently carries a Zacks Rank #2 (Buy). Other top-ranked stocks in the auto space include PACCAR Inc. (PCAR - Free Report) , Allison Transmission Holdings, Inc. (ALSN - Free Report) and Navistar International Corporation (NAV - Free Report) . PACCAR and Allison Transmission sport a Zacks Rank #1 (Strong Buy) while Navistar carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

PACCAR has an expected long-term growth rate of 10.8%. Over the past three months, shares of the company have gained 8.4%.

Allison Transmission has an expected long-term growth rate of 10%. Over the past three months, shares of the company have gained 18.6%.

Navistar has an expected long-term growth rate of 5%. Shares of the company have risen 13.2% in the past three months.

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