Peter Kalemkerian

Peter Kalemkerian inquired about the expected margin progression for the Vegetation Management Division through 2026, seeking an appropriate starting point for Q1 and directional guidance thereafter. He also asked about the M&A pipeline, specific verticals or adjacencies Alamo Group might target for future acquisitions, and the current focus given the recent Petersen integration.

Answer

Robert Hureau, President and CEO, explained that Q4 2025 Vegetation Management margin compression was due to lower volumes (tree care, municipal mowing), inventory reserves, and production inefficiencies from consolidation. He expects sequential top-line and margin improvement from Q4 2025 to Q1 2026, approaching but not fully reaching Q1 2025 levels. Longer-term, the goal is to stabilize end markets, return to 8% adjusted operating margin, and then progress towards 15% operating margin through procurement, parts/service, and manufacturing efficiencies. Regarding M&A, Hureau stated the pipeline is robust, focusing on tuck-in acquisitions ($10M-$20M EBITDA) close to core sales channels and product categories, with a near-term lean towards industrial, long-cycle opportunities.

Peter Kalemkerian from Baird asked for a detailed outlook on the Vegetation Management Division's margin progression throughout 2026, including an appropriate starting point for Q1 and subsequent directional trends. He also inquired about Alamo Group's M&A pipeline, specifically seeking insights into target verticals or potential adjacencies for future acquisitions.

Answer

Robert Hureau, President and CEO of Alamo Group, explained that Q4 2025 Vegetation margin compression was due to lower volumes from slowed end market demand in Tree Care and Municipal Mowing, inventory reserves, and production inefficiencies from facility consolidation. He projected sequential top-line and margin improvement from Q4 2025 to Q1 2026, approaching but not fully reaching Q1 2025 levels. Longer-term, the goal is to stabilize end markets and return to 8% adjusted operating margin, then progress towards 15% operating and 18% adjusted EBITDA margins through procurement, parts/service, and manufacturing efficiencies. For M&A, Mr. Hureau stated the pipeline is robust, focusing on tuck-in acquisitions ($10M-$20M EBITDA) close to core sales channels and product categories, with a near-term lean towards the Industrial space.

Peter Kalemkerian questioned CNH's more negative industry forecast for South America agriculture (down 5%-10%) compared to peers' flattish outlook, and asked for insights into market conditions, particularly differences between Brazil and other parts of the continent.

Answer

Gerrit Marx, CEO, explained CNH's cautious outlook for South America, citing upcoming elections, global trade uncertainties (e.g., China's soy purchases), and political factors in Brazil. He noted that while Argentina has shown some momentum, Brazil predominantly drives the region, and a rebound is not expected in 2026. CNH anticipates replacement demand to maintain current sales levels but remains cautious due to various unknowns.

Peter Kalemkerian inquired about CNH's more negative South America Ag industry forecast (down 5-10%) compared to peers' flattish outlook, seeking color on market observations and differences between Brazil and other parts of the continent.

Answer

CEO Gerrit Marx explained CNH's cautious view for South America due to upcoming elections, global trade uncertainties, and the Brazilian presidency. He noted that while Argentina has shown some momentum, Brazil predominantly drives the region. Marx stated that replacement demand maintains current sales levels but no rebound is expected in 2026, requiring CNH to remain cautious and less forward-leaning.

Peter Kalemkerian, on behalf of Mig Dobre at Baird, asked for details on second-half margin expectations by segment, the extent of excess capacity in Hydraulics, a potential timeline to return to a 22-23% margin profile, and an update on the commercial food service market.

Answer

CEO Sean Bagan and VP Corporate Controller Jeremy Evans projected margin uplift driven by higher volumes and a favorable product mix in both segments. Evans noted the CFP divestiture would add approximately 50 basis points to the consolidated adjusted EBITDA margin. Bagan confirmed they have sufficient capacity for several years of growth. He also highlighted the commercial food service market as a key incremental growth area, citing a new win with Cleveland (Welbilt) and the rollout of the Cygnus Reach software platform.