London-based CNH Industrial N.V. (CNHI) is a world-class provider of equipment and services. The company provides the strategic direction, R&D capabilities, and investments that enable the success of its five core brands: Case IH; New Holland Agriculture; STEYR, which provide 360° agriculture applications from machines to implements, and the digital technologies that enhance them; and CASE and New Holland Construction Equipment, which provide a full lineup of construction products that make the industry more productive.
The company's shares are down 11.8% in price over the past year and 18.6% over the past month to close yesterday's trading session at $14.38.
CNHI reported first-quarter 2022 adjusted earnings per share of 28 cents, representing a 12.5% decline from 32 cents in the prior-year quarter, but a higher figure than expected. The outperformance was driven by higher-than-expected sales in its construction equipment and financial services segments.
Here is what could shape CNHI's performance in the near term:
Mixed Financials
CNHI's total revenue grew 13.4% year-over-year to $4.65 billion for the three months ended March 31, 2022. However, its operating expenses increased 14.5% from its year-ago value to $4.17 billion. The company's net income declined 18.4% year-over-year to $333 million. Its earnings per share decreased 20% from the prior-year quarter to $0.24. In addition, and its cash and cash equivalents declined 36.2% year-over-year to $3.22 billion.
Mixed Profitability
CNHI's $2.82 billion trailing-12-months cash from operations is 1409.9% higher than the $186.97 million industry average. Its 5.9% trailing-12-months CAPEX/Sales multiple is 125.3% higher than the 2.7% industry average. However, its 18.4% trailing-12-months gross profit margin is 37.2% lower compared to the 29.3% industry average. Also, its trailing-12-months ROA, net income margin and ROC are 16.4%, 28.4%, and 22.2% lower compared to their respective industry averages.
Discounted Valuation
In terms of forward non-GAAP P/E, the stock is currently trading at 10.76x, which is 35.2% lower than the 16.6x industry average. Also, its 0.15x forward non-GAAP PEG is 88.6% lower than the 1.36x industry average. Furthermore, CNHI's 0.93x forward Price/Sales is 28.6% lower than the 1.30x industry average.
POWR Ratings Reflect Uncertainty
CNHI has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. CNHI has a D grade for Quality and a C for Stability. The company's mixed profitability is consistent with the Quality grade. In addition, the 1.77 stock beta is in sync with the Stability grade.
Of the 77 stocks in the B-rated Industrial – Machinery industry, CNHI is ranked #64.
Beyond what I have stated above, you can view CNHI ratings for Growth, Momentum, Value, and Sentiment here.
Click here to check out our Industrial Sector Report for 2022
Bottom Line
Infrastructure expenditure is likely to increase significantly in the coming months, with both private and public funding, which should benefit the stock. However, analysts expect CNHI's EPS to decline 2.8% in the current quarter (ending June 30, 2022) and 6.3% next quarter (ending Sept. 30, 2022). In addition, the stock is currently trading below its 50-day and 200-day moving averages of $15.13 and $16.40, respectively, indicating a downtrend. So, we believe investors should wait before scooping its shares.
How Does CNH Industrial N.V. (CNHI) Stack Up Against its Peers?
While CNHI has an overall C rating, one might want to consider its industry peers, THK CO. LTD. (THKLY), Amada Co. Ltd. (AMDLY), and Donaldson Company Inc. (DCI), which have an overall A (Strong Buy) rating.
CNHI shares fell $0.33 (-2.29%) in premarket trading Monday. Year-to-date, CNHI has declined -25.99%, versus a -13.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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