CNH Industrial NYSE: CNH raised its 2026 earnings and cash flow forecasts and announced a deal to place its construction equipment business in a joint venture with Kobelco Construction Machinery, as the company sharpens its focus on agriculture.
The agreement values the construction business at $1 billion and calls for Kobelco to acquire a 70% stake. CNH expects to receive $700 million in cash, subject to customary adjustments, and retain the remaining 30% for at least three years. The transaction is expected to close by the end of 2027, subject to regulatory approvals and other conditions.
On its third-quarter earnings call, CEO Gerrit Marx said the move advances CNH’s transformation into an agriculture equipment, technology and services company. He also pointed to signs of improvement in North America, while cautioning that agricultural equipment markets in Europe and Brazil remain challenging.
Construction Deal to Fund Debt Reduction
CNH plans to use the net proceeds from the construction transaction to reduce debt, CFO Jim Nickolas said. The joint venture will manufacture and distribute equipment under the Case Construction, New Holland Construction and Eurocomach brands.
CNH will continue to distribute New Holland Construction products directly outside Latin America. In Latin America, the brand will operate its own network under the joint venture. CNH Capital will remain with CNH and continue to provide financing and other services to the venture.
Marx said the partnership would give agricultural dealers access to a broader construction equipment lineup for farm applications. CNH does not plan to use Kobelco dealers to distribute its agricultural machinery, he said.
After the three-year lockup, a put-call arrangement would allow CNH to eventually transfer its remaining stake to Kobelco, Marx said. Nickolas said CNH plans to minimize or eliminate stranded costs as transition services wind down, with no expected impact on the remaining agriculture business’s margins.
Tariff Refunds Boost Quarterly Profit
For the quarter ended Sept. 30, consolidated revenue fell 1% from a year earlier to $4.4 billion, while industrial net sales were approximately flat at $3.7 billion. Adjusted industrial earnings before interest and taxes rose 94% to $202 million, and the adjusted industrial EBIT margin widened to 5.5% from 2.8%.
Adjusted net income was $205 million, or $0.16 per diluted share. Industrial free cash flow was an outflow of $10 million, an improvement of $178 million from the prior-year quarter.
Results included $71 million in net benefits from refunds of tariffs imposed under the International Emergency Economic Powers Act, after CNH reinvested some proceeds in one-time initiatives. The company expects further reinvestment in the fourth quarter.
Agriculture net sales fell 2% to about $2.9 billion. Adjusted EBIT increased to $173 million from $137 million, aided by operational execution, lower quality-related costs and $32 million in net tariff refund benefits. Without those benefits, agriculture adjusted EBIT would have been $141 million, with a 4.8% margin, compared with 4.6% a year earlier.
Construction net sales rose 5% to $777 million, and adjusted EBIT climbed to $65 million from $14 million. The segment received a $39 million net refund benefit; excluding it, adjusted EBIT would have been $26 million, with a 3.3% margin.
Financial services reported a $77 million net loss, primarily reflecting a $156 million non-cash valuation allowance against deferred tax assets in Brazil. Nickolas said elevated delinquencies had persisted for several years and that the allowance was prompted by the passage of time under accounting rules, rather than a new change in the market.
Higher 2026 Outlook and a Mixed Regional Picture
CNH raised its full-year adjusted diluted earnings forecast to $0.44 to $0.48 per share from $0.41 to $0.46. It also increased its industrial free cash flow outlook to $300 million to $450 million from $200 million to $400 million and now expects industrial net sales to rise approximately 2%.
The company maintained its forecast for approximately flat agriculture sales and narrowed the segment’s adjusted EBIT margin range to 5.1% to 5.4%. For construction, it raised its sales growth outlook to 8% to 10%.
Marx said dealer inventory normalization and model-year 2027 order intake support CNH’s view that 2026 will be the trough of the North American cycle. Agriculture dealer inventories fell approximately $100 million sequentially in the third quarter, and CNH expects another $150 million to $250 million decline in the fourth.
Nickolas said North American early orders were up roughly 15% to 20%, but cautioned against extrapolating that increase across all products or the full year. He also said the fourth quarter should not be treated as a run rate for 2027, although he expects margins to improve year over year in each quarter next year.
In Brazil, management expects 2027 to remain a transition year rather than the start of an upturn. Nickolas said 2028 is likely when the agricultural market improves and delinquencies return toward historically normal levels.
About CNH Industrial (NYSE:CNH)
CNH Industrial is a global manufacturer of agricultural and construction equipment. Its agricultural brands include Case IH, New Holland Agriculture and STEYR, which offer products such as tractors, combines, harvesters, sprayers and hay tools. Its construction equipment brands include CASE Construction Equipment and New Holland Construction, with machinery such as excavators, loaders and graders.
The company also provides parts, equipment support and precision technology designed to help customers manage machinery and improve productivity.
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