Why Is CNH (CNHI) Up 31.8% Since Last Earnings Report?

A month has gone by since the last earnings report for CNH Industrial (CNHI). Shares have added about 31.8% 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 drivers.

CNH Industrial Q1 Earnings Miss Estimates, Down Y/Y

CNH Industrial  posted first-quarter 2020 adjusted loss per share of 6 cents, as against the Zacks Consensus Estimate of earnings of 7 cents per share. In the prior-year quarter, adjusted earnings were 18 cents per share. This decline primarily resulted from lower revenues in the Agricultural Equipment, Construction Equipment, Commercial and Specialty vehicles, and Powertrain segments.

The company reported adjusted net loss of $54 million, as against the prior-year quarter’s net income of $264 million.

Consolidated revenues declined 15% from the year-ago quarter level to $5,461 million, missing the Zacks Consensus Estimate of $5,751 million. The company’s net sales for Industrial Activities came in at $5 billion, down 17% year on year. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $245 million in the first quarter, marking a slump of $722 million, year on year.

Segmental Performances

Net sales in the Agricultural Equipment segment declined 9.9% year over year to $2.24 billion in the quarter on industry volume deceleration. Moreover, the segment’s adjusted EBIT came in at $24 million, considerably down 85.7% from the year-ago quarter, thanks to unfavorable volume and mix, lower wholesale volume and inflated product costs.

The Construction Equipment segment’s sales slid 34.1% year over year to $422 million in first-quarter 2020. This decline chiefly resulted from deteriorating market conditions across all regions amid the coronavirus crisis. Further, the segment incurred a pretax loss of $83 million, as against the income of $13 million recorded in the prior-year quarter, hurt by elevated product costs due to plant shutdowns on the coronavirus scare.

During the March-end quarter, revenues in Commercial and Specialty vehicles fell 16.3% year over year to $2.02 billion on market slowdown in Europe due to the coronavirus pandemic. The segment incurred pretax loss of $56 million, as against the income of $51 million recorded in the prior-year quarter. This downside primarily stemmed from unfavorable foreign-currency translation, lower volumes and higher product costs.

The Powertrain segment’s quarterly revenues declined 27.3% year over year to $753 million on lower sales volume across regions. The segment’s adjusted EBIT was $31 million, down from the year-ago quarter’s $96 million due to unfavorable volume and mix.

The Financial Services segment revenues climbed 3.2% year over year to $489 million in the first quarter on higher used equipment sales in North America. Adjusted EBIT was $110 million, down from the year-earlier period’s $131 million.

Financial Details

CNH Industrial had cash and cash equivalents of $3.85 billion as of Mar 31, 2020, compared with $4.87 billion as of Dec 31, 2019. The company’s debt was $23.52 billion as of Mar 31, 2020, compared with $24.85 billion as of Dec 31, 2019.

As of Mar 31, 2020, CNH Industrial’s net cash used in industrial activities was $1,373 million compared with net cash used of $814 million in the prior-year quarter.

CNH Industrial suspended its quarterly cash dividend due to the coronavirus pandemic-related uncertainties.

2020 Outlook

CNH Industrial scrapped the 2020 guidance as it expects the coronavirus pandemic’s impact to strain its operations in the days to come.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -614.29% due to these changes.

VGM Scores

Currently, CNH has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise CNH has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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