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CNH (CNHI) Up 2.4% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for CNH Industrial (CNHI). Shares have added about 2.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.

CNH Industrial’s Q2 Earnings Beat Estimates, Rise Y/Y

CNH Industrial N.V. reported adjusted earnings per share of 31 cents in second-quarter 2019, which rose 11% from the year-ago quarter’s figure. Moreover, the bottom line surpassed the Zacks Consensus Estimate of 29 cents.

Reportedly, adjusted net income rose to $430 million from $397 million recorded in second-quarter 2018.

Consolidated revenues declined 5.9% from the year-ago quarter’s level to $7.57 billion. The figure missed the Zacks Consensus Estimate of $7.83 billion. The company’s net sales for Industrial Activities were $7.1 billion and adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $527 million.

Segmental Performances

Net sales in the Agricultural Equipment segment declined 7% year over year to $3.1 billion. Moreover, the segment’s adjusted EBIT was $341 million, down $55 million from the year-ago quarter’s tally.

Construction Equipment segment’s sales declined 5.3% year over year to $757 million. The adjusted EBIT was $25 million from $33 million recorded in the year-ago quarter.

Revenues in the Commercial and Specialty vehicles slumped 6.6% year over year to $2.7 billion. The segment’s adjusted EBIT was $100 million, up from $92 million recorded in the prior-year quarter.

The Powertrain segment’s revenues declined 7% year over year to $1.1 billion. The segment’s adjusted EBIT was $102 million compared with $108 million in the second quarter of 2018.

Revenues from the Financial Services segment declined 4.2% year over year to $519 million. Adjusted EBIT was $124 million, down $17 million from the prior-year quarter’s figure.

Financial Details

CNH Industrial had cash and cash equivalents of $3.7 billion as of Jun 30, 2019 compared with $5 billion as of Dec 31, 2018. The company’s debt was $24.4 billion as of Jun 30 compared with $24 billion as of Dec 31, 2018.

At the end of the second quarter, CNH Industrial’s net cash outflow from operations was $503 million compared with cash inflow of $727 million in the prior-year quarter.

Outlook

The company reiterated its projection for 2019. For the current year, it projects roughly $27-$27.5 billion in Industrial Activities’ net sales and adjusted earnings per share are expected in the range of 84-88 cents. Net debt of Industrial Activities at the end of 2019 is expected between $200 million and $400 million.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted -6.9% due to these changes.

VGM Scores

Currently, CNH has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile 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

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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