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CI

CNH Industrial N.V. (CNHI)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 was a down cycle quarter: consolidated revenue fell 16% YoY to $5.49B and Industrial net sales declined 19% YoY, while diluted EPS was $0.34 and adjusted diluted EPS $0.38 .
  • Management cut FY24 guidance across Agriculture net sales (-15% to -20%), Construction net sales (-15% to -20%), free cash flow ($0.7–$0.9B), and adjusted EPS ($1.30–$1.40); Construction margin guidance was maintained at 5–6% .
  • Cost actions (COGS and SG&A) continued to partially offset volume/mix headwinds; Industrial Activities gross margin was 22.9% (-210 bps YoY), adjusted EBIT margin 11.2% (-260 bps YoY) .
  • Management tone focused on disciplined execution, quality, dealer effectiveness, and accelerated technology offerings under returning CEO Gerrit Marx; Investor Day targeted for early 2025 .

What Went Well and What Went Wrong

What Went Well

  • SG&A restructuring and purchasing/manufacturing efficiencies mitigated lower volumes; Construction gross margin expanded +50 bps YoY to 16.5% despite net sales -16% .
  • CEO emphasis on brand focus, product pipeline, precision tech acceleration, and construction turnaround: “We will continue to manage the business prudently through 2024 while positioning ourselves for 2025” (Gerrit Marx) .
  • Financial Services revenue grew +14% YoY to $687M driven by higher yields and volumes (excluding EMEA), with managed portfolio up $2.5B YoY to $28.5B .

What Went Wrong

  • Agriculture under pressure: net sales -20% YoY to $3.91B; adjusted EBIT margin fell 310 bps to 13.7% on lower production volumes and unfavorable mix .
  • Industrial Activities free cash flow dropped to $140M from $386M YoY; cash & equivalents fell to $2.00B from $4.32B at 12/31/2023 .
  • Elevated risk costs and delinquencies in South America pressured Financial Services net income (-$3M YoY to $91M) and delinquency rate rose to 2.5% from 1.8% YoY .

Financial Results

Consolidated and Key Metrics

MetricQ2 2023Q1 2024Q2 2024
Consolidated Revenues ($USD Millions)6,567 4,818 5,488
Net Income ($USD Millions)710 402 438
Diluted EPS ($USD)0.52 0.31 0.34
Adjusted Diluted EPS ($USD)0.52 0.33 0.38
Industrial Activities Gross Profit Margin (%)25.0% 22.7% 22.9%
Industrial Activities Adjusted EBIT Margin (%)13.8% 9.8% 11.2%
Cash Flow from Operating Activities ($USD Millions)(139) (894) 379
Free Cash Flow – Industrial Activities ($USD Millions)386 (1,209) 140
Cash and Cash Equivalents ($USD Millions)4,322 3,236 2,002
Weighted Avg Shares – Diluted (Millions)1,355 1,274 1,260

Notes: Adjusted metrics per non-GAAP definitions and reconciliations in press materials .

Segment Breakdown

Segment MetricQ2 2023Q2 2024
Agriculture Net Sales ($USD Millions)4,890 3,913
Agriculture Gross Margin (%)27.0% 24.4%
Agriculture Adjusted EBIT ($USD Millions)821 536
Agriculture Adjusted EBIT Margin (%)16.8% 13.7%
Construction Net Sales ($USD Millions)1,064 890
Construction Gross Margin (%)16.0% 16.5%
Construction Adjusted EBIT ($USD Millions)72 60
Construction Adjusted EBIT Margin (%)6.8% 6.7%

KPIs

KPIQ2 2023Q1 2024Q2 2024
Effective Tax Rate (GAAP) (%)22.9% 19.2% 20.9%
Adjusted Effective Tax Rate (%)24.0% 19.4% 21.0%
Financial Services Revenue ($USD Millions)603 685 687
Financial Services Net Income ($USD Millions)94 118 91
Managed Portfolio ($USD Billions)—28.7 28.5
Delinquencies >30 Days (%)1.8 1.7 2.5

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2024)Current Guidance (Q2 2024)Change
Agriculture Net Sales (YoY)FY 2024Down 11% to 15% Down 15% to 20% Lowered
Agriculture Adjusted EBIT MarginFY 202413.5% to 14.5% 13.0% to 14.0% Lowered
Construction Net Sales (YoY)FY 2024Down 7% to 11% Down 15% to 20% Lowered
Construction Adjusted EBIT MarginFY 20245.0% to 6.0% 5.0% to 6.0% Maintained
Free Cash Flow – Industrial Activities ($USD Billions)FY 2024$1.1 to $1.3 $0.7 to $0.9 Lowered
Adjusted Diluted EPS ($USD)FY 2024$1.45 to $1.55 $1.30 to $1.40 Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023)Previous Mentions (Q1 2024)Current Period (Q2 2024)Trend
Cost Reduction (COGS/SG&A)Accelerating cost reductions; SG&A program launch Programs on track; SG&A down YoY; COGS actions ongoing Continued execution; targeting 10–15% run-rate SG&A reduction; cumulative savings trajectory Improving
Market Demand & ProductionSofter end markets; South America weakness Declining demand esp. EMEA/SA; retail deliveries outperformed market Further weakness; ag production hours ~30% lower YoY; dealer inventory normalization Worsening
Pricing RealizationFavorable pricing supported margins Agriculture pricing favorable; Construction flat Modestly favorable in Agriculture; flat in Construction Stable/modest
Warranty/Quality——Higher warranty costs highlighted externally; quality as priority in CEO comments Deteriorating (warranty); focus on improvement
Technology/Precision AgProduct innovation and record R&D Offboard management; Intelsat connectivity “Accelerating our technology offerings”; converge iron and precision Advancing
Regional TrendsNA combines down; EMEA mixed; SA down NA small tractors down; SA combines down sharply NA small tractors -11%; EMEA combines -36%; SA combines -26% Mixed; generally weaker

Management Commentary

  • “We will continue to manage the business prudently through 2024 while positioning ourselves for 2025… I am confident in our success and look forward to presenting our strategy with you at an investor day in early 2025.” — Gerrit Marx, CEO .
  • Priority themes: establish Agriculture as core with improved commercial and brand effectiveness; manage Construction with distinct governance; accelerate innovation and convergence of iron and precision; Investor Day early 2025 .
  • FY24 outlook explicitly cut to reflect weaker ag and construction markets; continued cost programs to partially offset volume impacts .

Q&A Highlights

  • Pricing vs market share: Management emphasized disciplined pricing and continued capital returns via buybacks/dividends, maintaining consistency (CEO Gerrit Marx) .
  • Dealer/customer feedback: Quality remains top priority; creation of Chief Commercial Officer to enhance dealer effectiveness and competitive positioning (CEO Gerrit Marx) .
  • Production vs mid-cycle: Expect to produce below industry levels to adjust inventories; construction cadence harder to define (CFO Oddone Incisa) .
  • Call timing: July 31, 2024 webcast covering Q2 results .

Estimates Context

  • S&P Global consensus estimates for CNHI were unavailable via our tool at the time of analysis; therefore, formal comparisons to Wall Street consensus cannot be provided. If you need estimates once available, we can refresh and re-run comparisons to consensus (S&P Global) [GetEstimates tool error: SpgiEstimatesError].

Key Takeaways for Investors

  • FY24 guidance cuts across Agriculture and Construction net sales, free cash flow, and adjusted EPS highlight continued end-market weakness; expect cautious sell-side revisions and potential multiple pressure near term .
  • Margin resilience supported by cost programs, but volume/mix headwinds compressed Industrial Activities gross margin (-210 bps YoY) and adjusted EBIT margin (-260 bps YoY); watch execution on SG&A run-rate reduction (10–15%) .
  • Agriculture remains the core earnings engine; near-term rebound depends on dealer destocking completion and improved farmer sentiment; pricing support remains modestly favorable .
  • Construction profitability is improving on cost actions (gross margin +50 bps YoY) despite top-line declines; distinct governance may unlock agility and optionality .
  • Financial Services stable topline but rising delinquencies (2.5% vs 1.8% YoY) and higher risk costs in South America warrant monitoring for credit normalization impacts .
  • Liquidity has tightened (cash down to $2.00B), but operating cash flow turned positive in Q2 ($379M) and Industrial FCF positive ($140M); full-year FCF guide lowered to $0.7–$0.9B .
  • Strategic catalysts: new CEO priorities, precision tech acceleration, and early 2025 Investor Day could reset the medium-term narrative once end-markets stabilize .

Appendix: Additional Comparisons vs Prior Periods and Estimates

EPS and Revenue vs Prior Periods

MetricQ2 2023Q1 2024Q2 2024
Diluted EPS ($USD)0.52 0.31 0.34
Adjusted Diluted EPS ($USD)0.52 0.33 0.38
Consolidated Revenues ($USD Millions)6,567 4,818 5,488

Estimates (Unavailable)

  • S&P Global consensus for Q2 2024 EPS/revenue was unavailable for CNHI via our system at the time of the request; no third-party estimate set was used to avoid inconsistency with the methodology requirement [GetEstimates tool error].