CNH Industrial Q1 Earnings Call Highlights

Key Points

• CNH reported Q1 revenue of $3.8 billion (flat YoY) with an industrial adjusted EBIT loss of $45 million, adjusted EPS of $0.01 and a $569 million industrial free cash flow outflow, and management reaffirmed full‑year 2026 guidance including industrial net sales flat to down 4%, industrial EBIT margin 2.5%–3.5%, and adjusted EPS $0.35–$0.45.
• The agriculture segment showed sharp regional divergence—EMEA up while North America and South America were down (South America down ~28%)—and profitability weakened with agriculture adjusted EBIT margin falling to about 1% from 5.4% due to negative mix, tariffs and higher R&D/SG&A.
• Changes to tariff application materially raised costs (CNH expects roughly a 210–220 bps drag on ag margins and ~600 bps on construction), while the company is keeping production deliberately low to reduce dealer inventories, says Q2 order books are full and expects sequential margin improvement in H2 2026.

CNH Industrial NYSE: CNH reported first-quarter 2026 results that management said were “as expected and guided,” as the company navigated what CEO Gerrit Marx described as historically low North American agriculture demand and ongoing financial challenges for farmers in Brazil. Executives also pointed to added complications during the quarter from changing tariff rules and an escalated conflict in the Middle East.

On the call, Marx said the company is “now passing through what we expect to be the lowest period of the current ag industry cycle,” and reiterated expectations that the first quarter would be the lowest quarter of 2026. He emphasized CNH’s disciplined production approach to reduce dealer inventory and manage a weak demand backdrop.

Q1 financial performance and cash flow

CNH posted consolidated revenues of $3.8 billion, which Marx said were flat year-over-year and included about 4% positive currency impacts. Industrial adjusted EBIT was a loss of $45 million, which Marx attributed primarily to tariffs and higher G&A and R&D expenses, “only partially offset by positive pricing and cost savings actions.” Adjusted net income was $21 million, and adjusted EPS was $0.01.

Free cash flow from industrial activities was a $569 million outflow, which Marx said was in line with the prior-year quarter and consistent with first-quarter working capital seasonality.

Agriculture results: regional divergence and margin pressure

CFO Jim Nickolas said agriculture net sales were about $2.6 billion, up 1% year-over-year, including 4% positive currency translation. He said sales volumes were lower in North and South America, while favorable pricing mainly came from North America. In EMEA, Nickolas said sales, volumes, and pricing were up “mostly in Europe for both tractors and combines,” supported by “moderately favorable industry demand and some market share gain.”

Marx detailed the regional performance for agriculture segment sales: EMEA up 20%, North America down 3%, and South America down 28%. He said that with depressed farm incomes and macro uncertainty, the company continued to see softness in equipment demand.

Profitability declined year-over-year. Nickolas said agriculture gross margin was 19.1% compared with 20% a year ago, while agriculture adjusted EBIT margin fell to 1% from 5.4% in Q1 2025. He said positive pricing and cost savings only partially offset negative regional mix and tariff impacts, and added that higher R&D and SG&A expenses were consistent with earlier indications.

On operations, Marx said CNH kept production levels low to manage channel inventory, noting ag dealer inventory levels were unchanged since the beginning of the year “by design.” He said dealers typically build inventory in Q1 ahead of Q2, but CNH’s plan is for dealers to reduce inventories by about $500 million in 2026. Marx said the company produced and shipped “only pre-sold orders or fast-moving stock orders,” and added that the net of price and product cost was positive in agriculture in Q1 and is expected to remain positive for the full year.

Construction results and supplier quality hold

Construction net sales declined 3% year-over-year to $574 million. Nickolas said higher sales in EMEA were more than offset by lower sales in North and South America. He also said the company “held back sales while working out a supplier quality issue to protect the customer,” but added that the issue has been resolved and the deferred sales “will be made up in Q2.”

Construction gross margin fell to 11.8% from 14.9%, which Nickolas said was “largely due to tariff impacts.” Construction adjusted EBIT margin was -4.9%.

When asked about the construction business strategy, Marx said CNH has “restarted our discussions with several partners for our construction business,” and said those discussions are progressing. He said CNH expects to be “clearer on the path forward” over the remainder of 2026 or the first half of 2027, while cautioning that the company is not rushing decisions.

Tariffs, pricing, and the outlook for 2026

Nickolas provided detail on tariff dynamics, including a recent change in how Section 232 steel and aluminum tariffs are applied. He said the company moved “from paying 50% on the value of only the metal to now paying anywhere from 0%-50% on the total value of the component or machine, depending on what it is.” For whole machine imports, he said CNH is now paying 25% on the total value of the unit, which is higher than before, while some component imports can be lower. Nickolas also noted ongoing Section 301 investigations for products coming from China, the EU, India, and Mexico, and said CNH has not included any impact from those in its forecast.

For agriculture, Nickolas said the change in tariff application is net neutral for calendar 2026, and CNH still forecasts tariff costs to be about a 210-220 basis point drag on ag margins, equating to roughly $120 million of costs. For construction, he said the expected impact has increased to about 600 basis points from roughly 500 basis points previously.

CNH reaffirmed its full-year 2026 guidance:

• Industrial net sales: flat to down 4% year-over-year
• Industrial EBIT margin: 2.5% to 3.5%
• Industrial free cash flow: $150 million to $350 million
• Adjusted EPS: $0.35 to $0.45 (assuming ~1.25 billion average shares)

For agriculture specifically, Nickolas said the company slightly improved its North America outlook for small tractors and combines, lowered the EMEA tractor outlook while becoming more optimistic on combines, and lowered the South America outlook for combines. Despite these changes, CNH reaffirmed agriculture net sales guidance of flat to down 5% and reaffirmed an agriculture EBIT margin outlook of 4.5% to 5.5%. He said CNH expects favorable currency translation of about 2% and positive pricing of 1.5% to 2%.

In construction, Nickolas said CNH fine-tuned its industry forecast slightly lower, but still expects its own net sales to be about flat year-over-year, with about 1% favorable currency and 2% pricing. The company reaffirmed construction EBIT margin guidance of 1% to 2%, saying cost reductions are expected to offset increased tariff impacts.

For the second quarter, Nickolas said CNH’s “order books are full” and the company expects agriculture net sales to be about flat year-over-year, while construction net sales are expected to be higher in the mid-teens, including sales pushed from Q1. He said Q2 margins in both businesses are expected to be within full-year guidance ranges, implying sequential improvement in the second half of 2026 versus the first half.

Demand signals, inventory actions, and financial services trends

On the Q&A, Marx said CNH is “fully booked in Q2” and has “pretty healthy coverage already for Q3,” while remaining disciplined about loading production with “real” dealer and customer orders rather than building company inventory. He said CNH is “pretty happy” with Europe’s trajectory and is accelerating dealer multi-brand consolidation there. In the U.S., he said CNH sees “very good momentum” with dealers even as the broader market declines. Latin America, particularly Brazil, remains an area of “extra efforts and extra attention,” with management emphasizing discipline on order intake due to credit conditions and pricing pressure.

Nickolas added that in Brazil—and more broadly in Latin America—tight credit conditions have led CNH and others to tighten underwriting standards, impacting demand.

Financial services segment net income was $74 million, down year-over-year, primarily due to higher risk costs in Brazil. Nickolas said retail originations were $2.2 billion and the managed portfolio ended the quarter at $28 billion. Sequential delinquency rates increased slightly to 3.5%, driven by persistent economic difficulty in South America. In Q2, CNH expects financial services net income to be lower year-over-year by $20 million to $25 million.

Nickolas also said CNH repurchased $26 billion worth of CNH stock in the first three months of 2026 at an average price of about $10.70 per share.

Looking further out, Marx said the company expects to enter 2027 with greater clarity around elections and trade policies, while noting that aging equipment fleets in North America and Europe could support modest demand. Nickolas added that CNH is underproducing versus retail by about 4% in 2026, which he said could be a tailwind if production returns to retail levels next year.

About CNH Industrial NYSE: CNH

CNH Industrial N.V. is a global capital goods company specializing in the design, production and sale of agricultural and construction equipment, commercial vehicles and powertrain solutions. The firm operates through five core brands—Case IH and New Holland for agricultural machinery, Case and New Holland for construction equipment, Iveco for light, medium and heavy commercial vehicles, and FPT Industrial for engines and drivetrain components. Established in 2013 through the combination of Fiat Industrial and CNH Global, the company draws on a rich heritage of innovation dating back to pioneering landmarks in farm and construction machinery from the 19th century.

The company's product portfolio encompasses tractors, combines, balers, excavators, backhoe loaders, trucks, vans and bespoke engines for marine, automotive and industrial markets.

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