CNH Industrial profit rises on higher prices, forecasts sales decline in 2024

By Bianca Flowers and Aatreyee Dasgupta

(Reuters) -CNH Industrial reported a higher fourth-quarter profit on Wednesday, boosted by strong prices for its farm and construction machinery despite slowing demand.

Shares for the Italian-American company were up 5% on the NYSE.

Price increases across the manufacturer’s machinery segments helped augment margins in spite of a revenue shortfall for agriculture and construction equipment. CNH executives have said demand for high-horsepower tractors in North America is a sign that farmers haven’t pulled back entirely on spending despite a sharp decline in crop commodity prices and a lower forecast for farmer income for 2024.

“Soft commodity prices are likely to be down for a couple of years — we are expecting the industry to be flattish from here for a little while,” CNH’s chief executive, Scott Wine told analysts on a conference call.

The company reported 42 cents earnings per share, in line with analysts’ expectations, but also forecast a decline in revenue across its equipment divisions in 2024. Net sales for farm equipment are expected to be down between 8% and 12%, while construction sales are predicted to be in the range of 7% to 11%.

CNH forecast free cash flow of industrial activities to be between $1.2 billion and $1.4 billion, compared with $1.3 billion and $1.5 billion last year.

The company in November rolled out a restructuring plan entailing a 5% reduction of its salaried workforce that it expects to translate to $140 million to $180 million in cost savings for the year.

“If they hadn’t taken some of the structural actions, the margin outlook for 2024, we think, would have been weaker,” said Kristen Owen, executive director at Oppenheimer & Co.

The company also announced an additional $500 million share buyback program. Executives said CNH will complete its existing $1 billion buyback by the end of the month.

“This extra 500 is a testament of how good they feel about their business, their margins, and cash flow capabilities even in a weakening cycle,” said Eric Greaser, a vice president at Moody’s.

Agriculture sales, which account for the bulk of CNH’s revenues, slid 8% to 4.95 billion. Quarterly revenue came in at $6.79 billion, down 2% from a year ago.

(Reporting by Aatreyee Dasgupta in Bengaluru, Bianca Flowers in Chicago; Editing by Maju Samuel, Chizu Nomiyama and Jonathan Oatis)