Zacks_Analysts' Blog : CNH Global Easily Beats - Analyst Blog

CNH Global N.V. (CNH) posted a net income before restructuring and exceptional items of $272 million or $1.13 per share in the third quarter of 2011, up from a net income of $102 million or 43 cents in the year-ago quarter.  The earnings results easily beat the Zacks Consensus Estimate of 82 cents per share.

Net sales of Equipment, excluding revenue from Financial Services were $4.61 billion, up 30% from the year-ago quarter, as agricultural equipment markets continue to perform well and the construction equipment market continues its recovery.

On a geographical basis, 42% of total revenues came from North America, 29% came from Europe, Africa, and Middle East. 17% of total revenues came from Latin America and 12% from Asia-Pacific. On a segmental basis, revenues from Agricultural Equipment were $3.6 billion, up 29% from the year-ago quarter, led by favorable trading conditions across all regions. This segment accounted for 77% of total revenues.

Revenues from Construction Equipment were $1047 million, up 36% from the year-ago quarter, led by improvements in market conditions in all regions.  This segment accounted for 77% of total revenues.

Net Income attributable to Financial Services was $53 million, up 13% from the year-ago quarter.

Equipment operating margin came in at 10.0% compared to 10.7% in the previous quarter and 6.8% in the year-ago quarter due to increased equipment demand (with resulting increases in industrial utilization) and improved net pricing.  

Agricultural Equipment reported an operating margin of 11.5%, up from 8.5% in the year-ago quarter but down from 12.9% in the previous quarter. Construction Equipment reported an operating margin of 4.7%, up from 0.5% in the year-ago quarter and 2.4% in the previous quarter.  

During the first nine months of 2011, Equipment Operations provided $390 million for operating activities and used $218 million for capital expenditure. The company ended the third quarter with cash and equivalents of $1.2 billion, down from $3.6 billion at the end of the previous quarter.

Guidance

For fiscal 2011, management expects strong demand in the agricultural and construction equipment markets, driven by a favorable environment for agricultural commodity prices and a positive environment in agricultural commodity prices and the consequent increase in planting and farming income estimates.

Further, the environment for construction equipment continues to improve overall with the exception of the APAC region where the demand environment has begun to slow from its significant growth trajectory over the last three years.

Based on the company’s performance, management reiterated its fiscal 2011 revenue guidance to 15%-20%. The company also reiterated its operating margin of 7.1% - 7.9%.

Incorporated in the Netherlands, CNH, a manufacturer of agricultural and construction equipment was formed in 1999, following the merger of New Holland N.V. and Case Corporation. Fiat group owns more than 89% of the shares in CNH.  CNH Global became a part of Fiat Industrial after the restructuring of Fiat. Fiat Industrial also includes Iveco (truck manufacturer) and portions of Fiat Powertrain.