CNH Industrial's Business Profile
CNH Industrial (CNH, Financial) is a global leader in capital goods, ranking as the world's second-largest manufacturer of agricultural machinery and a major force in the construction equipment industry. The company has three operating segments: Agriculture, Construction, and Financial Services. The Agriculture segment provides a full line of agricultural equipment, implements, precision agriculture solutions, and aftermarket service. The Construction segment provides construction equipment, including excavators, crawler dozers, graders, wheel loaders, backhoe loaders, skid steer loaders, and compact track loaders, along with a wide variety of attachments. CNH supports its equipment sales by offering a range of financing solutions, including retail finance for the purchase or lease of both new and pre-owned equipment from CNH and other manufacturers. Its strong portfolio of brands includes Case IH, New Holland, STEYR, Raven, New Holland Construction, Case Construction, and Eurocomach.
CNH's Q1 2025 Earnings Result Analysis
CNH Industrial reported a disappointing set of results for the first quarter of 2025, with both revenue and profitability declining sharply on a year-over-year (YoY) basis. Net sales fell by 21% YoY to $3,828 million, compared to $4,818 million in Q1 2024, reflecting broad-based weakness across key business segments. The adjusted EBIT margins contracted sharply by 580 basis points (bps) YoY to 3.2%, down from 9.0% in Q1 2024. The bottom line reflected the broader operational pressures, with adjusted diluted EPS declining 66% YoY to $0.10, compared to $0.30 in the prior-year quarter.
Segmental Performance
The Agriculture segment, which accounts for approximately 67% of total revenues, experienced a steep 23% YoY decline in net sales to $2,581 million. This was primarily driven by lower shipment volumes resulting from a combination of subdued industry demand across all regions and ongoing dealer destocking. The global demand for tractors, combines, and other heavy machinery has remained weak since late 2022, as persistently high input costs and declining farm incomes continue to pressure farmers' ability to invest in capital equipment. This negative trend has persisted into early 2025 and, according to management commentary, is expected to remain a headwind throughout the year.
Regionally, the North American market saw significant declines, with industry volumes down 12% and 24% for small and large tractors, respectively, and combines down 51% YoY. In EMEA, tractor and combine volumes dropped 23% and 34% YoY, respectively. In contrast, the South America and Asia Pacific (APAC) regions saw comparatively resilient demand. Tractor volumes rose 10% in South America, while combine volumes were up 1%. APAC experienced a 12% increase in overall tractor volumes. The segment's EBIT margin declined by 610 bps YoY to 5.4%, impacted by reduced volumes and higher R&D investments. These effects were only partially mitigated by improvements in purchasing efficiencies, manufacturing costs, and ongoing SG&A cost discipline.
The Construction segment, contributing roughly 15% of CNH's revenues, also reported weak performance, with net sales down 22% YoY to $591 million (from $758 million). The decline was attributed to lower shipment volumes, mirroring the softening demand across the construction sector. EBIT margins fell by 430 bps YoY to 2.4%, driven by lower shipment volumes and unfavorable pricing, with some offset from cost optimizations.
The Financial Services segment, which accounts for the remaining revenue, posted a 5% YoY decline to $651 million. This was primarily due to adverse currency translation effects, lower yields—especially in South America—and a reduction in used equipment sales tied to fewer operating lease maturities.
CNHI's Near term & Long term Outlook
Looking ahead, the global agriculture and construction equipment markets are expected to remain under pressure throughout calendar year 2025 and potentially into early 2026. Over the past several quarters, sustained weakness across both sectors has led to elevated channel inventories at OEMs, including CNH Industrial. As a result, CNH is expected to maintain reduced production levels for the next few months to better align with inventory levels across its supply chain. This strategic moderation in output, while necessary, will likely continue to weigh on both the top line and profitability of the company in the near term.
Reflecting the deteriorating demand environment, management has revised its full-year 2025 guidance downward. The prior sales outlook, which projected a decline in the range of (17)% to (12)%, has been adjusted to a wider and deeper contraction of (19)% to (11)%. For context, this implies a potential sales decline of up to 40% from 2023 levels, underscoring the severity of the market downturn.
Despite the challenging macro and industry conditions, CNH continues to focus on cost discipline. The company is actively implementing lean manufacturing practices, enhancing strategic sourcing, and maintaining tight control over SG&A and R&D spending. These measures are expected to partially cushion the impact of volume declines on profitability and margins, although overall earnings will remain under pressure as long as end-market demand stays muted.
The company's long-term outlook remains positive, as outlined by the management in its Investor Day. CNH Industrial's long-term strategy through 2030 is anchored in three strategic pillars: leading in integrated iron and technology, significantly boosting mid-cycle EBIT margins, and enhancing shareholder returns. The company aims to deliver 16–17% mid-cycle adjusted EBIT margins in Agriculture, up from 12.5% in 2024, by executing a further $550 million in cost savings, building on the $550 million already achieved since 2022. CNH is investing heavily in Precision Technology, targeting a doubling of its contribution to Ag net sales from 5% today to 10% by 2030. This will be achieved through increased factory-fit adoption (nearing 100% on large machines), proprietary development of 90% of the Precision Tech stack, and new AI-driven capabilities such as smart spraying (SenseApply) and autonomous field operations. These technologies aim to deliver measurable farmer benefits, including up to 26% yield improvement and 60–80% reduction in herbicide use.
Complementing its tech-driven strategy, CNH is also transforming its go-to-market and quality operations. The company is restructuring its global dealer network with a tailored regional approach, blending single- and multi-brand models, and investing to improve dealer returns by over 500 basis points while increasing parts and service revenue to over 35% of dealer sales. A 360-degree quality overhaul aims to cut non-quality costs by 200–250 basis points by 2030 through tighter governance, predictive maintenance, and manufacturing excellence programs like “no fault forward.” CNH is committed to returning substantially all industrial free cash flow to shareholders through the cycle while retaining flexibility for strategic M&A.
Top Investors' Stake Movement
As of March 2025, BlackRock remains one of the largest institutional investors in CNH Industrial, holding a 10.54% stake. Other major shareholders include Vanguard (7.26%), Harris Associates (6.73%), and Franklin Resources (4.61%). However, several prominent gurus have trimmed their positions recently, reflecting caution amid ongoing industry headwinds. David Einhorn (Trades, Portfolio) reduced his stake by 21.09%, while Mason Hawkin and Tweedy, Browne Company cut their holdings by 18.65% and 8.88%, respectively. Additionally, Brandes Investment Partners lowered its position by 7.08% in March 2025. These moves underscore broader investor concerns regarding near-term demand pressures in the agriculture and construction equipment sectors.
Does the current valuation indicate a buying opportunity?
CNH Industrial is currently trading at a forward P/E of 20.4x for 2025 and 14.0x for 2026, which represents a discount to its five-year historical forward P/E average of 18.36x. The company is also trading at a discount compared to its peers, including AGCO and Lindsay Corporation. AGCO is currently trading at a forward P/E multiple of 25.51x, whereas Lindsay is trading at 21.34x forward P/E. While the current valuation may appear attractive on a relative basis, we believe it is too early to initiate a position in the stock. The broader agriculture and construction equipment industries remain in the midst of a prolonged cyclical downturn, with no clear indication that the bottom has been reached. CNH, despite being a fundamentally strong player, is heavily exposed to industry trends and continues to face significant pressure on its volumes and margins. That said, the company's targeted strategy to expand Precision Tech to 10% of Ag net sales and deliver 16–17% mid-cycle EBIT margins by 2030 demonstrates clear long-term intent and execution focus. These structural initiatives, alongside $550M in additional cost savings and enhanced dealer network returns, reinforce CNH's ability to drive sustainable value. In our view, we should take a wait-and-watch approach, keeping CNH on the watchlist for potential entry once early signs of industry stabilization or recovery emerge.
