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CNH Revises Agreement with Kobelco

Zacks Equity Research

CNH Global N.V. (CNH) recently announced certain changes in its global alliance with Kobelco Construction Machinery Co., Ltd. The agreement is about to move into the next phase, which will feature non-exclusive licensing and supply agreements between the two companies.

This change in alliance will be effective from January 1, 2013 where CNH Global and Kobelco Construction Machinery will exit their current joint ownership and equity participations in all the companies and do away with any exclusive geographic rights. Under the terms of the agreement, CNH will continue manufacturing hydraulic excavators with technology from Kobelco and will procure certain models from Kobelco for atleast five years. In addition, it will continue to procure component parts from Kobelco for atleast ten years.

The strategic move by CNH global is aimed toward a stronger future for the company’s global customers, dealers and overall business with complete ownership of business in all regions. The new agreement will also enable the company to directly operate in the growing construction equipment markets like Asia-Pacific.

CNH Global reported EPS of $1.34 in third quarter 2012 versus $1.14 in the prior-year quarter. The rise in net income was led by the company’s impressive performances in the agricultural, financial and industrial services businesses neutralizing the negative effects of the currency translation and high research and development expenses during the quarter.

Headquartered in Amsterdam, CNH Global is a manufacturer of agricultural tractors, combines, and construction equipment. The company’s operations are organized into three business segments: agricultural equipment, construction equipment and financial services.

CNH Global currently has a Zacks #3 Rank, which translates into a short-term Hold rating. We also have a long-term Neutral recommendation on the stock. One of its competitors, Caterpillar Inc (CAT) also holds a Zacks #3 Rank.

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