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CNH Industrial eyes key resistance amid solid fundamentals

The new year could start positively for CNHI as the fundamental situation remains optimistic.

CNH Industrial is global equipment and services firm that produces farm and construction equipment for 180 markets. Since 1842, it has manufactured equipment under four primary brands: Case IH, New Holland Agriculture, New Holland Construction, and CASE Construction Equipment.

New Innovations in Electric and LNG Tractors

On December 9, CNH Industrial unveiled a prototype of the New Holland T4 Electric Power, the first all-electric light utility tractor in the industry.

Developed by its teams in the United States and Italy in partnership with strategic partner Monarch Tractor in California, the prototype was displayed under the New Holland Agriculture brand. Still, the commercial version will also be sold under the Case IH name.

T4 Electric Power is ideal for mixed agricultural, animal, municipal, orchard, and specialty uses. Commercial production is anticipated to commence by the end of 2023, followed by a larger product range.

The T7 Methane Power LNG (Liquid Natural Gas) pre-production tractor was revealed by CNH Industrial at its Tech Day in Phoenix on the same date.

Historic Third Quarter Income

CNH Industrial released its third-quarter results on November 8, 2022. It reported EPS of $0.41 vs. the average estimate of $0.32.

CNH Industrial has an outstanding track record of earnings surprises. It has only missed once in the previous five years, and it was in early 2020 when the coronavirus pandemic struck.

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The company’s consolidated revenue for the third quarter was a record-breaking $5.8 billion, up 23.9% year-over-year.

A combination of positive volume, price realization, operational performance, and product mix contributed to a 260-basis-point rise in Industrial Activities’ gross margins. However, the business did caution that substantial supply chain difficulties continue to exist and that inflation remains high.

Quarterly free cash flow was $202 million, and the business continues to target $1 billion in annual industrial free cash flow.

Increased Annual Guidance

CNH Industrial boosted its full-year target for net sales to a range of 16% to 18% growth despite the difficulties, based on the excellent third-quarter performance.

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In the previous two months, seven analysts’ earnings projections for 2022 and 2023 have been boosted. During this period, the overall consensus for 2022 increased from $1.38 to $1.47. In 2021, the firm earned $1.35, representing an 8.9% increase in profits.

Cheap valuations persist

CNH Industrial shares have been turbulent this year, but they are presently down around 17% for the year. However, they remain inexpensive on a forward P/E basis. It trades at just 10.9x.

Additionally, CNH Industrial is shareholder-friendly. It yields a dividend of 1.8% now. Lastly, on September 19, 2022, the company launched a $300 million share repurchase program valid through October 12, 2023.

The major resistance is now at previous cycle highs of $16.80. If the price jumps above that level, we might see a rally toward the 2021 top at around $19.80.

CNHI daily chart,

CNHI daily chart, source: author´s analysis,

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