CNH Global Beats Estimates
CNH Global NV (CNH) reported a net income (excluding restructuring and exceptional items) of $230 million or 92 cents in fourth quarter of 2012 compared with $189 million or 79 cents in the year-ago quarter. The quarterly results outpaced the Zacks Consensus Estimate of 71 cents.
For full year 2012, net income stood at $1,179 million or $4.83 per share versus $918 million or $3.82 per share in the year-ago quarter.
The rise in net income was led by the company’s impressive performance in the agricultural and industrial businesses, neutralizing the negative effects of currency translation and high research and development expenses during the quarter.
Revenues
Net sales in fourth quarter 2012 totaled $4,929 million versus $4,768 million in the year-ago quarter. The reported revenues beat the Zacks Consensus Estimate of $4,535 million. For full year 2012, net sales increased 8% year over year to $19.4 billion. The rise in sales was driven by robust demand for agricultural equipments, which offset the negative effects of the struggling construction equipment segment and foreign currency translation.
Segment-wise, Agricultural Equipment sales amounted to $4.0 billion in the fourth quarter versus $3.7 billion in the year-ago quarter. The increased sales were on the back of the company’s impressive pricing structure, positive product mix and higher volume.
CNH worldwide production of agricultural equipment trailed the fourth quarter sales, resulting in strong cash flow as the Group implemented scheduled slowdown in production to reduce dealer inventory to year-end desired levels.
Construction Equipment sales came in at $915 million versus $1,073 million in the year-ago quarter. The reduction in sales was due to demand slowdown in geographic regions other than North America and Europe.
CNH’s worldwide production of construction equipment was 21% below the quarterly retail sales as the Group continued to balance inventory levels and was in line with the expected demand levels in 2013.
Financial Services net income stood at $79 million in fourth quarter versus $66 million in the year-ago quarter.
Agriculture Equipment’s gross margin in the fourth quarter was 20.0% versus 18.5% in the year-ago quarter. Gross margin for the Construction Equipment segment decreased to 11.1% from 12.3% in the year-ago quarter
Balance Sheet and Cash Flows
As of Dec, 2012, cash and cash equivalents came in at $2,008 million versus $2,055 million in the year-ago quarter. Long-term debt was $14.3 billion at year-end 2012 versus $13.0 billion in the year-ago period.
As of Dec 2012, net cash provided by operating activities was $1,185 million versus $994 million generated a year ago
Dividend
CNH paid a special dividend of $10 per share on Dec 28, 2012 in connection to the combination transaction between CNH Global N.V. and Fiat Industrial S.p.A.
Outlook
Management provided inital guidance for full year 2013. Industry’s Agricultural and Construction Equipment unit volumes are expected to be flat to up 5% while the company’s revenues are expected to grow more than 5% with operating margins in the range of 8.5 % - 9.0% in 2013.
CNH Global operates in an intensely competitive landscape that includes big players like Lindsay Corporation (LNN) and Deere & Company (DE).
CNH Global currently has a Zacks Rank #3 (Hold). One of its competitors, Valmont Industries (VMI) carries a Zacks Rank #2 (Buy).
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