July 27th 2011 08:45 am
CNH Global N.V. – Value
There is no slowdown in agriculture. CNH Global N.V. (CNH – Snapshot Report) recently blew by the Zacks Consensus Estimate for the second quarter as agriculture equipment sales jumped 22%. Yet even as agriculture remains hot, this Zacks #1 Rank (strong buy) is a value stock with a forward P/E of just 13.7.
CNH Global manufactures agriculture and construction equipment for customers in 170 countries under the Case and New Holland brands.
CNH Easily Beat By 24% for Q2
On July 25, CNH reported its second quarter results and blew by the Zacks Consensus Estimate by 34 cents per share. It was the 7th consecutive earnings surprise.
Earnings per share were $1.33 compared with just 59 cents in the second quarter of 2010.
Sales soared 24% to $4.9 billion from $3.9 billion in the year ago quarter. Both agriculture and construction equipment saw big sales increases of 22% and 30% respectively. Agriculture equipment is still the largest segment, with sales of $3.9 billion.
The EAME and CIS markets continued to see strong agriculture equipment growth with revenue up 40% on firm demand across all product segments.
On the construction equipment side, light equipment sales rose 29% while heavy equipment was up 20%. Contrary to popular perception that the construction industry is in the doldrums in North America, that segment saw demand up 37% from both light and heavy equipment.
In Latin America, sales were up 27% due to strong demand from both public and private sector projects. EAME & CIS markets also saw a 33% gain as the industry rebuilt from the prior year’s low levels.
Outlook for 2011
Demand in both the agriculture and construction equipment markets is expected to stay firm for the rest of 2011 as commodity prices remain elevated and farmers experience some of their highest income ever.
CNH also forecasts an improving construction equipment market. Construction equipment demand is expected to be up 25% to 30% worldwide for the full year.
Zacks Consensus Estimates Jump on the News
Given the bullish earnings report and outlook for the remainder of 2011, its not surprising that analysts moved to raise 2011 estimates.
The full year Zacks Consensus Estimate rose by 7 cents to $3.05 since the report.
This is earnings growth of 47% compared to 2010 when the company made just $2.08 per share.
Shares Decline in 2011
Investors haven’t been enamored of the stock recently, as shares have fallen from a 2-year high hit in February.
This sell off makes CNH an even more attractive value.
In addition to a P/E under 15, which is the usual cut-off for value, it also has a price-to-book ratio of 1.3, well under the 3.0 cut-off.
CNH also has a price-to-sales ratio of just 0.6. A P/S ratio under 1 usually indicates a company is undervalued.
CNH Global is a way for investors to play the growing agriculture, but also construction, markets at an attractive valuation.
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Tags: Cnh Global, Global
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