CNH Earnings were so Good They Pulled Deere Stock Up

Dow Jones
08/03

CNH Industrial's second-quarter earnings report gave investors hope that the agricultural cycle is turning. Hope was enough.

Monday, CNH announced earnings per share of 13 cents from sales of $4.8 billion. Wall Street was looking for 10 cents and $4.8 billion, respectively.

Shares were up 15% at $11.79 in early trading, while the S&P 500 was up 0.9%.

A three-cent beat isn't likely the biggest reason. Guidance is the more instrumental factor, and they show things are getting better. The company said it expects agricultural sales to be flat year over year. Prior guidance was flat to down 5%. Construction sales are expected to be up about 8% year over year. Prior guidance was for flat sales.

Investors have been waiting for a turn in the agricultural cycle for a while. In this cycle, Deere earned almost $35 a share in fiscal year 2023 and is expected to earn about half that in fiscal year 2026.

CNH guidance is likely helping Deere, whose shares were up 3.6% in early trading at $613.86. Shares of AGCO, another ag-equipment maker, were up 2.5% at $104.72.

Gains leave CNH and AGCO stock down less than 10% year to date. Deere stock was up about 23% year to date.

"Our second quarter results reflect disciplined execution by the CNH team in a market that remains at the trough of the agriculture cycle," said CEO Gerrit Marx in a news release. "While farmer economics remain pressured, we are seeing constructive equipment-cycle indicators, including dealer inventory normalization, aging fleets, and a more balanced relationship between new and used equipment pricing."

Things aren't great, but they were good enough for investors on Monday.

 

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