The agriculture and construction equipment makers have been in
the sweet spot.
CNH Global N.V.
) is expected to grow earnings by the double digits as global
farmers reap record income. But you can pick up this Zacks #1 Rank
(Strong Buy) on the cheap as it trades with a P/S ratio of only
Fiat Industrial To Acquire CNH
On May 30, 2012, CNH Global announced it had received a proposal
from Italy-based Fiat Industrial S.p.A. regarding a combined
transaction of the companies.
Fiat currently owns 88% of CNH, which manufactures agriculture and
construction equipment for customers in 170 countries under the
Case and New Holland brands. It is based in the Chicago suburbs.
Fiat Industrial makes trucks. It was spun off from Fiat in 2010.
The merger will combine the industrial with the construction and
agriculture equipment makers.
The new company will be listed on the NYSE and also on a secondary
European market. It's headquarters may leave Italy.
Shareholders in both companies will get shares in the new entity.
Another Beat In The First Quarter
On Apr 25, CNH announced first quarter results and surprised by
52.1%. It kept alive a substantial earnings surprise streak that
has lasted 10 quarters.
Earnings per share were $1.11 compared to the consensus at just 73
cents. This was 76.2% higher than the first quarter of 2011 when
the company made only 63 cents.
Sales rose 22% to $4.6 billion. Both agriculture and construction
showed gains in the quarter. Agriculture, which has been hot for
the last few years, jumped 18% to $3.6 billion as planted acreage
rose on higher commodity prices.
Construction equipment sales climbed 41% mainly due to increased
demand in the Americas where sales more than doubled.
North America was the largest market with 45%, followed by EAME
& CIS at 31%.
Outlook For 2012 Remains Bullish
In April, CNH was bullish about the agriculture and construction
sectors. Agriculture equipment demand was expected to be flat to up
5% on firm commodity prices.
Construction equipment demand is forecast to continue with its
recent recovery, with sales rising 5% to 10% for the year.
2012 Zacks Consensus Estimate Rises
The analysts have been bullish on 2012 since the first quarter
earnings report in April.
In the last 30 days, the Zacks Consensus rose 2.8% to $4.69.
That is earnings growth of 22.3% as the company made $3.83 per
share in 2011.
Still Tons of Value
CNH has been a value stock for some time. I have been covering it
for over a year. Shares took a dive in 2011 but recovered some of
it in 2012. Still they haven't retaken the previous high.
The company has a price-to-earnings ratio of just 8.8. That is well
below the 15x cut-off I use for value stocks. It also puts it
squarely between its two main competitors.
) has a forward P/E of 9.2 and
) trades at 7.5x.
CNH also has a low price-to-book ratio of 1.2. A P/B ratio under
3.0 usually indicates value. It is also under both Deere's P/B of
4.1 and AGCO's at 1.3.
The Fiat/CNH transaction should be completed by the end of the
year. Investors looking for a solid value play in the agriculture
sector should take a look at CNH.
Tracey Ryniec is the Value Stock Strategist for
. She is also the Editor of the Turnaround Trader and Insider
Trader services. You can follow her on twitter at
CNH GLOBAL NV (CNH): Free Stock Analysis Report
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