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CNH Global-AmTrust Ties Extended

Zacks Equity Research

Recently the coalition between CNH Capital, an operating unit of Amsterdam based CNH Global N.V. (CNH) and AmTrust Financial Services, Inc. (AFSI) was strategically extended. The companies will be jointly involved in augmenting CNH Capital’s insurance products and financial service offerings.

This alliance would generate several long-term licensing and service contracts for CNH Capital. Moreover, according to this agreement, CNH Capital Insurance Agencies which includes CNH Capital Insurance Agency Inc. and CNH Capital Canada Insurance Agency, Ltd. will be acquired by AmTrust.

This conflation would not only ossify ties between CNH Global and AmTrust, but also substantially proliferate CNH Capital’s market share globally, especially across North America. There is also a huge opportunity for CNH Global to grow steadily in future, deriving much from burgeoning demand for its diverse product lines.

Earlier, CNH Global reported revenue of $4.64 billion, up 22.2% year over year in the first quarter of fiscal 2012. The rise was primarily attributable to trading profitability achieved in the agricultural equipment segment and the surge in American construction equipment sales during the quarter.

As the company traverses through 2012, it looks forward to an overall accelerated performance with such noteworthy advances. CNH Global's GAAP revenues are expected to grow around 5% in fiscal 2012 with operating margins above 8.6%.

However, it is indeed wise for the company to remain cautious of its competitors in the industry as they are also proactive on implementing market expansion strategies and constructive measures. Ominous threats in the industry include Deere & Company (DE), Kubota Corp. (KUB) and Briggs & Stratton Corp. (BGG).

The current Zacks Consensus Estimates for the second quarter of 2012 and for fiscal 2012 are $1.52 and $4.69, respectively. The company currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are maintaining a long-term Outperform recommendation on the stock.

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Read the Full Research Report on KUB

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