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CI

CNH Industrial N.V. (CNHI)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 was challenged by cyclical demand declines—consolidated revenue fell 10% to $4.82B and diluted EPS was $0.31; adjusted EPS was $0.33 as pricing and cost actions partially offset volume pressure .
  • Agriculture margins compressed 200 bps YoY to 12.5% on lower volumes; Construction margins improved 150 bps to 6.7% on cost reductions, despite lower sales .
  • Management lowered FY 2024 guidance (Ag net sales, Ag EBIT margin, adjusted EPS, FCF), citing deeper industry declines—key catalyst for stock reaction; cost programs remain on track to mitigate the cycle .
  • Financial Services delivered strong profitability (net income $118M, originations +11% YoY) with managed portfolio at $28.7B; delinquencies ticked up to 1.7%—watch South America credit risk .

What Went Well and What Went Wrong

  • What Went Well

    • Construction segment profitability improved: adjusted EBIT margin rose to 6.7% (+150 bps YoY) on better purchasing/manufacturing costs and lower SG&A .
    • Management executing cost reductions: logistics, manufacturing efficiencies, SG&A restructuring aimed at 10–15% run-rate cuts; cumulative savings outlined in the Q1 slide deck .
    • CEO emphasized disciplined execution and tech investments amid declining demand: “improve what we can control – production efficiency, disciplined commercial execution, judicious SG&A reductions, and thoughtful product and technology investments” .

  • What Went Wrong

    • Agriculture margins and volumes down: adjusted EBIT margin fell 200 bps YoY to 12.5%; net sales down 14% on weaker industry demand and dealer inventory management .
    • Free cash flow absorption worsened: Industrial FCF was -$1,209M vs -$673M in Q1 2023, driven by seasonal inventory growth .
    • Full-year guidance cut: Ag net sales and margin ranges lowered; Company EPS and FCF ranges reduced—reflects deeper agriculture cycle pressure, especially South America and EMEA .

Financial Results

MetricQ3 2023Q4 2023Q1 2024
Consolidated Revenues ($USD Billions)$5.986 $6.792 $4.818
Net sales of Industrial Activities ($USD Billions)$5.332 $6.018 $4.131
Net Income ($USD Millions)$570 $617 $402
Diluted EPS ($)$0.42 $0.46 $0.31
Adjusted Diluted EPS ($)$0.42 $0.42 $0.33
Gross Profit Margin – Industrial Activities (%)23.9% 21.8% 22.7%
Adjusted EBIT Margin – Industrial Activities (%)12.3% 11.6% 9.8%

Segment breakdown – Agriculture

MetricQ3 2023Q4 2023Q1 2024
Net Sales ($USD Millions)4,384 4,947 3,373
Adjusted EBIT ($USD Millions)672 669 421
Adjusted EBIT Margin (%)15.3% 13.5% 12.5%
Gross Margin (%)25.6% 23.3% 23.8%

Segment breakdown – Construction

MetricQ3 2023Q4 2023Q1 2024
Net Sales ($USD Millions)948 1,071 758
Adjusted EBIT ($USD Millions)60 62 51
Adjusted EBIT Margin (%)6.3% 5.8% 6.7%
Gross Margin (%)15.9% 14.8% 17.4%

KPIs – Financial Services

KPIQ3 2023Q4 2023Q1 2024
Revenue ($USD Millions)653 768 685
Net Income ($USD Millions)86 113 118
Retail Loan Originations ($USD Millions)3,043 3,412 2,504
Managed Portfolio ($USD Billions)26.8 28.9 28.7
Delinquencies >30 Days (%)1.6% 1.4% 1.7%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Agriculture segment net sales (YoY)FY 2024Down 8%–12% Down 11%–15% Lowered
Agriculture segment adjusted EBIT marginFY 202414.0%–15.0% 13.5%–14.5% Lowered
Construction segment net sales (YoY)FY 2024Down 7%–11% Down 7%–11% Maintained
Construction segment adjusted EBIT marginFY 20245.0%–6.0% 5.0%–6.0% Maintained
Free Cash Flow – Industrial Activities ($USD Billions)FY 2024$1.2–$1.4 $1.1–$1.3 Lowered
Adjusted Diluted EPS ($)FY 2024$1.50–$1.60 $1.45–$1.55 Lowered
Adjusted Effective Tax Rate (%)FY 202425%–27% 24%–26% Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023, Q4 2023)Current Period (Q1 2024)Trend
Cost reduction (COGS, SG&A)Launched SG&A restructuring; accelerating cost programs and CBS/lean initiatives Programs “on track,” savings across logistics/manufacturing; SG&A reductions continue Strengthening execution
Technology stack & connectivityPrecision tech independence via Raven/Hemisphere; product innovations Offboard management and Intelsat satellite connectivity initiatives highlighted Ongoing build-out
Dealer inventory managementAggressive actions to optimize dealer inventory “More aggressively addressing dealer inventories” noted in business highlights Continued focus
Regional demand (Ag/CE)South America softer; combines weakness in EMEA; CE heavy/light down Ag demand down across regions; CE demand mixed with APAC light/heavy modest growth Ag pressure persists
Financial Services creditDelinquencies rising through 2023; profitability resilient Delinquencies 1.7% vs 1.4% prior Q; net income up on volumes/margins, discrete tax items Mild credit normalization
2024 outlookPrior cut to IA net sales growth and FCF range; EPS target ~$1.70 Further reductions to Ag, EPS, and FCF ranges given lower industry volumes Further cautious

Management Commentary

  • CEO tone on Q1 cycle and execution: “The CNH team navigated a declining market environment… improving production efficiency, disciplined commercial execution, judicious SG&A reductions, and thoughtful product and technology investments” — Scott W. Wine, CEO .
  • Cost programs: Management targets 10–15% run-rate reductions in SG&A with restructuring charges up to $200M; cumulative savings path illustrated in slides .
  • Segment messages: Ag margin pressure from lower production volumes and unfavorable mix; CE margins improved on purchasing/manufacturing cost actions .

Q&A Highlights

  • The Q1 2024 earnings call transcript could not be retrieved due to a document database inconsistency, so Q&A highlights are unavailable in this recap .

Estimates Context

  • S&P Global consensus estimates for Q1 2024 revenue and EPS were unavailable due to a CIQ mapping issue for CNHI; therefore, comparisons to Wall Street consensus cannot be provided for this quarter. Values would have been retrieved from S&P Global if available.

Key Takeaways for Investors

  • Agriculture down-cycle deeper than earlier expected: Ag net sales and margin guidance lowered; monitor South America and EMEA demand, and combine trends .
  • Construction shows margin resilience: CE adjusted EBIT margin up YoY to 6.7% despite sales declines, supported by cost actions—an offset within the portfolio .
  • Cost programs are a key defense: SG&A restructuring and product cost initiatives progressing; expect partial offset to lower demand and support through-cycle margins .
  • Cash dynamics seasonal and inventory-driven: Industrial FCF absorption of -$1.209B in Q1 reflects seasonal build; watch inventory normalization and working capital in 2H .
  • Financial Services strong, but credit normalizing: FS net income up, portfolio growth continues; delinquencies increased to 1.7%—keep an eye on South America risk costs .
  • Updated FY 2024 guide is conservative: Lowered EPS ($1.45–$1.55) and FCF ($1.1–$1.3B) set a more achievable bar; execution on cost and retail performance will drive upside potential .
  • Liquidity and leverage manageable: Cash and equivalents $3.236B; consolidated debt $27.8B; available liquidity robust per slides—supports capital allocation continuity .

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