CNH Global N.V.
) recently reported a net income (excluding restructuring and
exceptional items) of $323 million in the third quarter of 2012,
surging 18.8% year over year but declined 9.3% sequentially.
Diluted EPS was $1.34 in the quarter versus $1.14 in the prior
year quarter and $1.47 in the previous quarter. The results beat
the Zacks Consensus Estimate of $1.16.
The rise in net income was led by the company's impressive
performances in the agricultural, financial and industrial
services businesses neutralizing the negative effects of the
currency translation and high research and development expenses
during the quarter.
Net sales in the third quarter amounted to $4.83 billion,
proliferating 4.8% year over year but down 3.8% sequentially. The
rise in the sales was driven by the mounting demand for the
company's Agricultural Equipment business and increased
agricultural product prices, neutralizing the adverse impact of
drought in North America. The decline in the construction
equipment sales owing to the weak market condition and foreign
currency translation was mitigated by the rise in sales of the
agricultural equipment. The results surpassed the Zacks Consensus
Estimate of $4.56 billion.
Segment-wise, Agricultural Equipment sales amounted to $4.0
billion, increasing 12.3% annually but remaining flat
sequentially. The rise in the sales was on the back of the
company's impressive pricing structure, positive product mix and
higher volume. The segment witnessed accelerated revenue growth
in all of its regions (based on constant currency).
Construction Equipment sales came to $830 million with a 20.7%
yearly and 17.1% sequential decline. The reduction in sales was
attributable primarily to the weak industrial condition in Latin
America as well as in the APAC region.
Agriculture Equipment's gross margin in the third quarter of
2012 was 22.0% versus 21.8% in the third quarter of 2011 and
22.7% in the previous quarter. Gross margin for the Construction
Equipment segment decreased to 12.9% from 16.0% in the previous
year period and 13.8% in the last quarter.
Operating margin for Agricultural Equipment came to 12.0%
compared with 11.5% in the previous year quarter and 12.6% in the
last quarter. This was a result of product and pricing mix
The decline in the volumes of the commercial products,
currency translation and industrial capacity absorption proved
detrimental to the Construction Equipment margin during the
quarter, due to which operating margin dropped to (1.8)% from
4.7% in the previous year period and 1.7% in the last
Effective tax rate for the third quarter of 2012 were lower
than management's previously provided forecast of 32% - 35% for
full year 2012, coming in at 31%.
Selling, general and administrative expense was $427 million
compared with $470 million in the year-earlier quarter, and
research, development and engineering expense was $160 million
compared with $131 million in the prior-year quarter.
Balance Sheet and Cash Flows
Exiting the third quarter of 2012, the cash and cash
equivalents came in at $998 million down from $1.1 billion at the
end of June 2012. Long-term debt was $12.6 billion at the end of
September 30, 2012 compared to $13.9 billion at the end of the
Year to date, net cash used by operating activities was $321
million versus $66 million generated in the previous year period.
Capital expenditures incurred were $334 million, increasing 53.2%
from the prior year period.
Management maintained its guidance for full year of 2012.
Industry's Agricultural and Construction Equipment unit volumes
are expected to be flat to down 5% while the company's revenues
are expected to grow more than 5% with operating margins above
8.6% in 2012.
Based in Amsterdam, CNH Global N.V. engaged in manufacturing
agricultural and construction equipment products. The company's
primary competitors include big players such as
Deere & Company
The company currently retains a Zacks #5 Rank, which
translates into a short-term 'Strong Sell' rating. We also
maintain a long-term 'Underperform' recommendation on the
CATERPILLAR INC (CAT): Free Stock Analysis
CNH GLOBAL NV (CNH): Free Stock Analysis
DEERE & CO (DE): Free Stock Analysis
(KMTUY): ETF Research Reports
To read this article on Zacks.com click here.