Sign in
CI

CNH Industrial N.V. (CNH)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was a trough-like quarter by design: consolidated revenues fell 21% to $3.83B and diluted EPS was $0.10 as CNH cut production to accelerate dealer destocking; adjusted EBIT margin for Industrial Activities dropped to 3.2% .
  • Versus Wall Street consensus, revenue beat ($3.83B vs $3.72B*) and EBITDA beat ($287M vs $204M*), while EPS was essentially in line ($0.10 vs $0.102*); price/cost was favorable in Agriculture and nearly even in Construction as incentives were raised to move aged inventory . Values retrieved from S&P Global*.
  • Guidance was widened/lowered on tariff uncertainty: Ag EBIT margin cut to 7–9% (from 8.5–9.5%) and FY adjusted EPS to $0.50–$0.70 (from $0.65–$0.75); free cash flow range lowered to $0.1–$0.5B .
  • Stock-relevant narrative: tariff scenario planning, modest North America price adjustments effective May 1, and continued inventory reductions (~$100M in Q1; ~$1B since Q1’24) set up 2H improvement cadence, with Q2 still relatively low and double-digit Ag margins targeted in 2H .

What Went Well and What Went Wrong

  • What Went Well

    • Dealer destocking progressed despite seasonal headwinds: Ag dealer inventory down ~$100M in Q1 and ~$1B since Q1 2024, with production hours down 26% YoY to match retail pace later in the year .
    • Precision tech/product adds: CNH launched Case IH SenseApply and New Holland IntelliSense sprayer automation, leveraging Augmenta vision tech; management emphasized cost savings initiatives and balanced price/cost in Ag .
    • Cash flow improved YoY: operating cash flow of $162M vs $(894)M in Q1’24, and Industrial free cash flow outflow improved by $642M to $(567)M .

  • What Went Wrong

    • Demand and margins compressed: Net sales of Industrial Activities declined 23% YoY; Industrial gross margin fell 370 bps to 19.0%; Ag EBIT margin fell to 5.4% and Construction to 2.4% on lower shipments and unfavorable price realization .
    • Higher tax rate and FS credit costs: effective tax rate rose to 29.0% (19.2% in Q1’24), and Financial Services delinquencies >30 days increased to 2.3% with risk costs up in South America and North America .
    • Tariff uncertainty widened outcomes: updated guidance ranges reflect potential H2 tariff increases and a possible additional 5% NA Ag demand decline vs trough, necessitating price adjustments and supplier cost-sharing .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Consolidated Revenues ($USD Billions)$4.65 $4.88 $3.83
Net Sales of Industrial Activities ($USD Billions)$4.00 $4.13 $3.17
Diluted EPS ($)$0.24 $0.14 $0.10
Adjusted Diluted EPS ($)$0.24 $0.15 $0.10
Adjusted EBIT – Industrial Activities ($USD Millions)$336 $194 $101
Adjusted EBIT Margin – Industrial Activities (%)8.4% 4.7% 3.2%
Gross Profit Margin – Industrial Activities (%)21.7% 19.5% 19.0%
Free Cash Flow – Industrial Activities ($USD Millions)$(180) $848 $(567)

Segment breakdown (Q1 2025 vs Q1 2024):

SegmentMetricQ1 2024Q1 2025
AgricultureNet Sales ($USD Millions)$3,373 $2,581
Gross Margin (%)23.8% 20.0%
Adjusted EBIT ($USD Millions)$388 $139
Adjusted EBIT Margin (%)11.5% 5.4%
ConstructionNet Sales ($USD Millions)$758 $591
Gross Margin (%)17.4% 14.9%
Adjusted EBIT ($USD Millions)$51 $14
Adjusted EBIT Margin (%)6.7% 2.4%
Financial ServicesRevenues ($USD Millions)$685 $651
Net Income ($USD Millions)$118 $90

KPIs:

KPIQ1 2024Q1 2025
Cash from Operating Activities ($USD Millions)$(894) $162
Free Cash Flow – Industrial Activities ($USD Millions)$(1,209) $(567)
Net Cash (Debt) – Consolidated ($USD Millions)$(22,947) (Dec 31, 2024) $(23,526) (Mar 31, 2025)
Managed Portfolio ($USD Billions)$28.7 (Mar 31, 2024) $28.0 (Mar 31, 2025)
Delinquencies >30 Days (%)1.7% (Mar 31, 2024) 2.3% (Mar 31, 2025)
Cash & Cash Equivalents ($USD Millions)$3,191 (Dec 31, 2024) $1,695 (Mar 31, 2025)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Agriculture Segment Net Sales (YoY)FY 2025Down 13%–18% Down 12%–20% Widened; midpoint lower
Agriculture Adjusted EBIT MarginFY 20258.5%–9.5% 7%–9% Lowered
Construction Segment Net Sales (YoY)FY 2025Down 5%–10% Down 4%–15% Widened; lower end lower
Construction Adjusted EBIT MarginFY 20254%–5% 2%–4% Lowered
Free Cash Flow – Industrial ActivitiesFY 2025$200M–$500M $100M–$500M Lowered low end
Adjusted Diluted EPSFY 2025$0.65–$0.75 $0.50–$0.70 Lowered/widened

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 2025)Trend
Tariffs/MacroWeak end markets; production cuts; lowered 2024 outlook on elevated dealer inventory Detailed tariff scenario planning; modest NA price adjustments from May 1; supplier cost-sharing; widened FY ranges Worsening/Uncertain
Dealer DestockingQ4: Ag inventory down >$700M; 34% fewer production hours Q1: ~$100M destock; ~$1B vs Q1’24; production hours down 26% YoY; aim to match retail pace in 2H Improving
Pricing/Price-CostQ3: Unfavorable net price realization in Ag/Constr Ag price/cost favorable; Constr near even; incentives used to clear aged units Improving
Quality/WarrantyNoted quality costs in 2H’24 Quality accruals still a YoY headwind in Q1; expected to reverse as factory output quality improves Improving later
Technology InitiativesOngoing precision focus; Investor Day planned Launch of SenseApply/IntelliSense sprayer automation; continued investment in iron + tech Advancing
Regional TrendsNA/EMEA demand down across tractors/combines; APAC mixed; SA down NA tractors -12% (<140 HP), -24% (>140 HP), combines -51%; EMEA tractors -23%, combines -34%; SA tractors +10%, combines +1%; APAC tractors +12%, combines -12% NA/EMEA soft; SA improving tractors
Leadership/OrgTransformation, quality focus CFO transition to Jim Nickolas (effective May 6); broader leadership changes Transition

Management Commentary

  • “Our ag dealers continue to make meaningful progress in reducing their inventory… production hours were down 26% versus Q1 2024” .
  • “Effective today… we implemented a modest price adjustment in North America for new orders while sharing the tariff cost impact with our supply base” .
  • “We forecast 2025 net sales to be 11% to 19% lower than 2024 with an industrial adjusted EBIT margin between 4.5–6.5%… free cash flow now $100M–$500M” .
  • CFO transition: “Oddone Incisa will be succeeded by James (Jim) Nickolas… will present at Investor Day on May 8” .

Q&A Highlights

  • Tariff EPS impact: Management indicated the change in guidance midpoint largely reflects tariff scenarios; outcome depends on policy evolution through summer .
  • Ag margin cadence: Q1 the low point; Q2 still relatively low; expectation for double-digit Ag profitability in 2H as production normalizes and pricing/incentives moderate .
  • Price adjustments timing: NA adjustments effective May 1 on new orders; flow-through tied to cost timing; pre-sold orders protected; model year 2026 pricing later in year .
  • Inventory levels and regional read-through: Targeting production pace to equal retail in 2H; Brazil sentiment improving but capex still cautious; Europe mixed; NA retail interest steady on low levels .
  • Imported product economics: CNH not applying flat surcharges; granular BOM assessment with supplier sharing; higher inventories on imported mid/small tractors managed carefully to avoid stocking at higher prices .

Estimates Context

MetricConsensus (Q1 2025)Actual (Q1 2025)
Revenue ($USD Billions)$3.72*$3.83
Primary EPS ($)$0.102*$0.10
EBITDA ($USD Millions)$204*$287 [GetEstimates shows actual; press release provides EBIT not EBITDA; actual EBITDA reflected here]*

Values retrieved from S&P Global*. EPS/revenue counts: EPS (# est) = 14*, Revenue (# est) = 5*.

Key Takeaways for Investors

  • CNH executed destocking and cost actions; despite a trough quarter, operating cash flow improved materially and free cash flow outflow narrowed vs prior year .
  • Revenue and EBITDA beat consensus; EPS was in line—price/cost favorable supports margin stabilization as incentives moderate in coming quarters . Values retrieved from S&P Global*.
  • Guidance ranges were widened/lowered due to tariff uncertainty—monitor policy outcomes and CNH’s ability to mitigate via pricing and supplier cost-sharing .
  • Management signaled cadence: Q2 still subdued; 2H recovery targeted with double-digit Ag margins and retail/production alignment, a potential positive inflection for the stock .
  • Credit quality and tax rate are watch items: FS delinquency uptick and 29% ETR headwind temper near-term EPS; look for improvements as quality costs ease and collections stabilize .
  • Strategic/leadership continuity: CFO transition to Jim Nickolas aligns with sharpened financial discipline; Investor Day on May 8 as a catalyst for mid-cycle targets and tech roadmap .
  • Regional mix matters: NA/EMEA demand soft; SA tractor demand turning positive; CNH’s balanced exposure may cushion volatility and support share defense in heavy U.S.-made products .