Why Agriculture & Construction Equipment Maker CNH Industrial's Shares Are Diving Today

CNH Industrial NV CNHI shares are trading lower by around 9% after it reported Q3 FY23 earnings results.

Revenue grew 2% Y/Y to $5.99 billion, flat Y/Y at a constant currency basis, missing the consensus of $6.06 billion.

Net sales of Industrial Activities were $5.33 billion, down 1%Y/Y, mainly due to a decline in industry demand in Agriculture in South America and EMEA. 

Pricing continued to be favorable for both Industrial segments, and Construction net sales grew by around 6%.

Adjusted EPS of $0.42 beats the consensus of $0.41.

The gross profit margin of Industrial Activities was 23.9% (23.0% in Q3 2022), with improvement both sequentially and vs the prior year in Agriculture and Construction. 

Agriculture segment adjusted EBIT margin expanded 50 bps Y/Y to 15.3%, and Construction segment adjusted EBIT margin up 360 bps Y/Y to 6.3% in Q3.

The company had cash and cash equivalents of $3.7 billion at the end of Q3.

Restructuring Initiative: CNHI initiated an immediate restructuring program targeting a 5% reduction in salaried workforce cost, coupled with a comprehensive rightsizing of its cost structure to be implemented early next year. 

Between the immediate reductions this year and the additional actions next year, CNHI projects a run rate reduction of 10%-15% on total labor and non-labor SG&A expenses and expects to incur restructuring charges of up to $200 million.

2023 Outlook: Given the softening of end market conditions, predominantly in South America, the company modified the 2023 outlook for its Industrial Activities, with net sales growth of 3%-6% from 8%-11% year on year, including currency translation effects. 

The free cash flow of Industrial Activities is now expected to be $1.0 billion-$1.2 billion (from $1.3 billion-$1.5 billion). 

CNHI projects an adjusted EPS of about $1.70 versus the consensus of $1.75.

Also Read: CNI Industrial's Proactive Inventory Management And Solid Operating Results Promise Greater Value: Analyst

Price Action: CNHI Industrial shares are down 9% at $10.31 on the last check Tuesday.