CNH Global N.V. (CNH) posted a net income before restructuring and exceptional items of $138 million or 57 cents per share in the first quarter of 2011, which soared from a net income of $38 million or 16 cents in the year-earlier quarter. The earnings results were ahead of the Zacks Consensus Estimate of 43 cents per share.
Net sales of Equipment, excluding revenue from Financial Services were $3.8 billion, up 17% from the year-earlier quarter. The revenue increase was attributable to double digit growth across Agricultural Equipment and Construction Equipment. Consolidated revenue for the quarter, including finance and interest income improved to $4.1 billion from $3.5 billion in the year-earlier quarter.
On a segmental basis, revenues from Agricultural Equipment were $3.1 billion, up 16.9% from the year-earlier quarter, led by favorable trading conditions across all geographical regions excepting Latin America. Revenues from Construction Equipment were $726 million, up 19% from the year-earlier quarter, attributable to remarkable improvements in market conditions in Latin America and Asia, coupled with better market conditions in North America due to ageing fleet replacements.
Equipment operating margin improved to 6.5% from 4.4% in the year-earlier quarter, led by higher revenues, increased industrial utilization and improved product pricing. Agricultural Equipment reported an operating margin of 8.6% compared with 6.9% in the year-earlier quarter. Construction Equipment reported an operating margin of (2.3%) compared with (5.9%) in the year-earlier quarter.
During the first quarter of 2011, Equipment Operations used $240
million for operating activities and $54 million for capital expenditure.
Guidance
For fiscal 2011, management is positive on the demand in the equipment markets, driven by a favorable environment for agricultural commodity prices and a steadily improving environment in Construction Equipment.
The company expects a decline of $300-$500 million in revenue and $40-$60 million in operating profit, largely because of the earthquake in Japan, which is very likely to negatively affect production in the next two quarters. Having taken into account the difficult situations, management reaffirmed its 2011 revenue guidance of 10% growth and operating margins expectation of 7.1%-7.9%.
Incorporated in 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.
Encouraged by the quarter’s results, we currently have an Outperform recommendation on CNH, with a Zacks #1 Rank (short-term Strong Buy rating) on the stock.
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