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CNH Industrial N.V. (CNH)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 was deliberately weak as CNH prioritized channel destocking and pricing discipline: consolidated revenues fell 28% YoY to $4.88B and adjusted diluted EPS was $0.15; Industrial free cash flow was strong at $848M driven by inventory reductions .
  • Agriculture net sales declined 31% YoY to $3.41B with adjusted EBIT margin down to 7.2% (vs. 12.8% in Q4 2023) on lower volumes; Construction net sales fell 33% YoY to $718M with margins resilient at 14.8% gross despite volume declines .
  • Management guided 2025 down: Industrial net sales -12% to -17% YoY, Agriculture net sales -13% to -18% with 8.5%–9.5% EBIT margins, Construction net sales -5% to -10% with 4%–5% EBIT margins, adjusted EPS $0.65–$0.75, and Industrial FCF $200M–$500M; production hours planned -15% to -20% YoY and pricing flat-to-slightly positive (second-half stronger) .
  • Strategic execution remains focused on structural cost reductions (~$600M run-rate savings exiting 2024), quality upgrades, and precision tech insourcing (in-house precision components up from ~60% in 2023 to ~80% in 2024), underpinning decremental margins and mid-cycle cash conversion targets over time .

What Went Well and What Went Wrong

What Went Well

  • Dealer destocking achieved: “Agriculture dealer inventory went down in Q4 by over $700 million due to focused retail sales support and 34% fewer production hours” .
  • Structural cost savings: “We exited 2024 with about $600,000,000 of run rate savings…These are structural cost reductions…important contributions to our good decremental margins” .
  • Construction margin resilience: Q4 Construction gross margin held flat YoY at 14.8% despite a 33% net sales decline, reflecting material cost control and plant efficiencies .

What Went Wrong

  • Top-line pressure: consolidated revenues down 28% YoY; Industrial net sales down 31% as demand softened and CNH under-produced retail to accelerate channel normalization .
  • Margin compression in Agriculture: adjusted EBIT margin fell to 7.2% (Q4 2023: 12.8%) on volume/mix; additional warranty costs weighed on reported product cost optics (Q4 +$52M; FY +$146M vs 2023) .
  • Financial Services risk costs: Q4 FS net income fell to $92M (from $113M), reflecting higher risk costs in the Americas and lower recoveries on used equipment sales; >30-day delinquencies up YoY to 1.9% (down sequentially) .

Financial Results

Consolidated performance vs prior year and prior quarter

MetricQ4 2023Q3 2024Q4 2024
Consolidated Revenues ($USD Billions)$6.792 $4.654 $4.876
Diluted EPS (GAAP) ($USD)$0.44 $0.24 $0.14
Adjusted Diluted EPS ($USD)$0.39 $0.24 $0.15
Industrial Activities Gross Margin (%)21.8% 21.7% 19.5%
Industrial Activities Adjusted EBIT Margin (%)11.0% 8.4% 4.7%

Segment breakdown

Segment MetricQ4 2023Q3 2024Q4 2024
Agriculture Net Sales ($USD Millions)$4,947 $3,310 $3,411
Agriculture Adjusted EBIT ($USD Millions)$635 $336 $244
Agriculture Adjusted EBIT Margin (%)12.8% 10.2% 7.2%
Construction Net Sales ($USD Millions)$1,071 $687 $718
Construction Adjusted EBIT ($USD Millions)$62 $40 $18
Construction Adjusted EBIT Margin (%)5.8% 5.8% 2.5%
Financial Services Revenues ($USD Millions)$768 $659 $743
Financial Services Net Income ($USD Millions)$113 $78 $92

KPIs and cash metrics

KPIQ4 2023Q3 2024Q4 2024
Industrial Free Cash Flow ($USD Millions)$1,630 $(180) $848
Dealer Inventory Reduction (Agriculture) ($USD Millions)——>$700
Production Hours Change (Ag, YoY) (%)——(34)%
Financial Services Managed Portfolio ($USD Billions)$28.9 (Sep 30) $29.0 (Sep 30) $27.8 (Dec 31)
Retail Loan Originations ($USD Millions)$3,412 $2,841 $3,216
Delinquencies >30 days (%)1.4% (Dec 31, 2023) 2.2% (Sep 30, 2024) 1.9% (Dec 31, 2024)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Agriculture Net Sales YoY (%)FY 2025Not provided previouslyDown 13%–18%New
Agriculture Adjusted EBIT Margin (%)FY 2025Not provided previously8.5%–9.5%New
Construction Net Sales YoY (%)FY 2025Not provided previouslyDown 5%–10%New
Construction Adjusted EBIT Margin (%)FY 2025Not provided previously4%–5%New
Industrial Activities Net Sales YoY (%)FY 2025Not provided previouslyDown 12%–17%New
Adjusted Diluted EPS ($USD)FY 2025Not provided previously$0.65–$0.75New
Industrial Free Cash Flow ($USD Millions)FY 2025Not provided previously$200–$500New
Adjusted Effective Tax Rate (%)FY 2025Not provided previously24%–26%New
R&D Expense (€)FY 2025Not provided previously~€800MNew
CapEx (€)FY 2025Not provided previously~€500MNew
Production Hours YoY (%)FY 2025Not provided previously(15)%–(20)%New
Pricing OutlookFY 2025Not provided previouslyFlat-to-slightly positive; H1 flat/slightly down, H2 positive low-mid single-digitNew
Shareholder ReturnsFY 2025Dividend 25%–35% of prior-year net income; buyback program outstandingMaintain dividend within policy; maintain buyback programMaintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Channel destocking & production disciplineQ2: under-producing retail to manage elevated inventories; updated 2024 outlook downward . Q3: inventories remain elevated; further production cuts, lower 2024 guidance .Achieved >$700M Ag dealer destocking; Q4 Ag production hours -34% YoY; will under-produce retail at least through H1 2025 .Improving inventory health; discipline continuing.
Cost reduction & sourcingOngoing SG&A and COGS programs; restructuring charges; targeting 10–15% SG&A run-rate reductions .~$600M run-rate savings exiting 2024; strategic sourcing waves to ramp in 2025+ .Strengthening execution.
PricingQ2: modestly favorable in Ag; flat in Construction . Q3: unfavorable net price realization in Construction .H1 2025 pricing flat-to-slightly down amid retail actions; H2 price-positive low-mid single-digit as production aligns to retail .Mixed short term; improving H2.
Warranty & qualityQ3: margin pressured; strategic investments in technology/quality .Non-repeat of one-time warranty costs anticipated; proactive quality programs to drive share and margins .Tailwind in 2025.
Tariffs/tradeQ3: macro/geopolitical headwinds factored in .Tariffs manageable via pricing, resourcing, potential reshoring; decisions depend on certainty and timelines (12–18 months for assembly moves) .Manageable but uncertain.
Regional demandQ2: broad weakness; NA tractors mix; EMEA down; SA down . Q3: NA/EMEA down; SA down; APAC mixed .2025 industry trough expected; NA large cash crop down 25%–30%; SA may recover first into 2026; EMEA slightly down .Near-term pressured; SA leading recovery.
Financial Services healthQ2/Q3: higher delinquencies in SA; net income down modestly .Delinquencies 1.9% (down seq.), FS net income ~$92M; portfolio $27.8B .Stabilizing sequentially; watch SA.

Management Commentary

  • “As intended, Agriculture dealer inventory went down in Q4 by over $700 million due to focused retail sales support and 34% fewer production hours.” – CEO Gerrit Marx .
  • “We exited 2024 with about $600,000,000 of run rate savings…structural cost reductions…important contributions to our good decremental margins.” – CEO Gerrit Marx .
  • “Adjusted diluted EPS [FY] $1.05; 2025 adjusted EPS forecast $0.65–$0.75. Free cash flow positive in 2025 between €200,000,000–€500,000,000.” – Management .
  • “We will continue an annual dividend and we will maintain our share repurchase program in 2025.” – CFO Oddone Incisa .
  • “Production hours are planned to be 15% to 20% lower in 2025 than in 2024…pricing flat to slightly positive…opportunity to grow in the second half.” – CEO Gerrit Marx .

Q&A Highlights

  • Pricing cadence: H1 pricing flat-to-slightly down due to targeted retail programs; H2 price-positive low-mid single-digit with improving gross margins as production aligns with retail .
  • Tariff preparedness: Manage via pricing pass-through, resourcing/dual sourcing, and potential reshoring of assembly if policy certainty supports; 12–18 months needed for major assembly relocation decisions .
  • Decrementals and warranty: Expect recovery of the ~$146M FY warranty drag in 2025 (some higher costs still in H1), aiding contained decremental margins .
  • Production vs retail by region: H1 2025 production -10% to -15% YoY (vs strong Q1 2024), H2 down 5%–10% or flat with Q4 positive; NA large cash crop down 25%–30% YoY, SA recovery into 2026, EMEA slightly down .
  • Cash conversion: Mid-cycle target ~70% remains; 2025 conversion muted by low activity levels, dealer incentives, and maintained CapEx levels .

Estimates Context

  • Wall Street consensus (S&P Global Capital IQ) was unavailable for this request period; therefore, comparisons to consensus estimates could not be provided. Values retrieved from S&P Global were unavailable due to request limits.

Key Takeaways for Investors

  • CNH is prioritizing long-term positioning over near-term earnings, aggressively normalizing dealer inventories and preserving pricing; this supports cleaner channels and better price realization into the next upcycle .
  • Structural cost actions (~$600M run-rate savings) and precision tech insourcing (in-house from ~60% to ~80%) enhance decremental margins and set up EBIT recovery when volumes stabilize .
  • 2025 guidance acknowledges an industry trough (especially NA large cash crop); investors should expect weak H1 and improving H2 cadence with pricing/gross margin uplift as production aligns with retail .
  • Warranty cost tailwinds (non-repeat of 2024 one-time items) and ongoing sourcing/efficiency programs provide margin support in 2025 despite lower volumes .
  • Construction business shows sustained gross margin resilience despite volume declines, indicating turnaround progress and cost discipline .
  • Financial Services risks are moderating sequentially (delinquencies down to 1.9% from Q3), but SA remains a watch item; portfolio remains robust at $27.8B .
  • Tactical exposure to tariffs appears manageable through pricing/resourcing; larger assembly moves require policy certainty and 12–18 months lead time, implying limited near-term disruption .