(CNH) CNH Global NV Beats on Earnings

Industrial goods manufacturer CNH Global NV (CNH) reported a net income (excluding restructuring and exceptional items) of $326 million or $1.33 per share in first quarter 2013 compared with $269 million or $1.11 per share in the year-ago quarter. The healthy year-over increase in earnings was attributable to continued strength in the agricultural sector market, robust industrial performance and improved results by the financial services business. The reported earnings were well ahead of the Zacks Consensus Estimate of 94 cents.


Net sales in first quarter 2013 aggregated $4,697 million versus $4,639 million in the year-ago quarter, representing a year-over-year increase of 1% or 3% on a constant currency basis. The rise in sales was buoyed by robust demand for agricultural equipments, which offset the negative effects of lower volume in the construction segment, higher selling, general and administrative expenditures, and higher research and development expenses.

Agricultural equipment net sales accounted for 84% of total equipment sales, while construction equipment accounted for the balance 16%. On a geographical basis, North America generated 44% of total net sales in the quarter, followed by Europe, Africa, the Middle East and CIS (EAME & CIS, 30%), Latin America (19%), and Asia Pacific (APAC, 7%).

Segment Performance

Agricultural equipment sales totaled $3,943 million in the reported quarter versus $3,615 million 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. All the geographic regions, barring APAC, reported year-over-year increase in net sales in the segment.

By product categories, worldwide performance was in line with the market in tractors, while sale of combines was up globally. The company’s global production of agricultural equipment was 19% above retail sales in the reported quarter, as it augmented inventory levels to accommodate the spring and summer selling seasons and the launch of the new combine in North America.

Construction equipment sales came in at $754 million versus $1,024 million in the year-ago quarter, representing a year-over-year decline of 26%. The reduction in sales was due to a demand slowdown in all geographic regions. Capacity utilization of the segment was reduced during the quarter in order to match inventory levels with lesser demand.

Financial Services’ net income stood at $90 million in the reported quarter versus $73 million in the year-ago quarter due to a higher average portfolio and a lower provision for credit losses.

Balance Sheet

At quarter-end, cash and cash equivalents stood at $1,482 million with long-term debt of $14.8 billion.


For full year 2013, CNH Global expects Agricultural unit volume to be flat to down 5% and Construction equipment to be down 5% to 10%, while the company’s revenues are expected to grow by 5% with operating margins in the range of 8.5 % – 9.0%.

CNH Global currently has a Zacks Rank #1 (Strong Buy). Other players in the industry worth mentioning include Alamo Group, Inc. (ALG), Komatsu Ltd. (KMTUY), and AO Smith Corp. (AOS), each carrying a Zacks Rank #2 (Buy).

ALAMO GROUP INC (ALG): Free Stock Analysis Report

SMITH (AO) CORP (AOS): Free Stock Analysis Report

CNH GLOBAL NV (CNH): Free Stock Analysis Report


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