BoA Upgrades CNH Industrial To Buy For 'First Time Ever'

CNH Industrial NV CNHI shares have lost 21 percent over the past one year. BofA Merrill Lynch’s Ross Gilardi upgraded the rating for the company from Neutral to Buy, while raising the price objective to $8.

“The current mood on the global ag equipment markets remains dreary, with our recent survey showing NA farmer sentiment at multi-year lows. We still don’t have much visibility on when the cycle turns, but NA combine demand will likely finish 2016 at 20 year lows, analyst Ross Gilardi wrote.

Poised To Benefit

CNH Industrial’s shares have been lagging those of the other farm equipment companies. Gilardi added, however, that the company is poised to benefit from even the slightest improvement in Latin America. He explained that Latin America and Asia Pacific account for 20-25 percent of the company’s sales.

With total EM exposure of more than 30 percent, and CNH Industrial is among the bigger beneficiaries of potential EM stabilization in Latin America, which accounts for 10-12 percent of sales.

Ag Equipment Markets

Brazil and Argentina are the world’s only markets where “planted acreage is actually growing over the long term,” the analyst said. He added, “Our recent farm equipment survey detected that the used combine inventory situation in North America became slightly “less worse” last quarter, and this was confirmed by industry auction expert Machinery Pete, who recently noted that used combine values ticked up a notch sequentially in the first quarter.”