CNH Industrial Shares Increase in Pre-Market Trade Following Raymond James Upgrade

Shares of CNH Industrial experienced a 1% increase in pre-market trading on Tuesday following a positive upgrade from Raymond James, which elevated its rating from “market perform” to “outperform.”

This upgrade comes in light of CNH’s extended period of underperformance, which Raymond James analysts now consider a compelling entry point for investors. They have set a price target of $14 for CNH, indicating a possible upside of around 34%, which includes a dividend yield of 4.4%.

The analysts anticipate that CNH will maintain its margins through cost-cutting measures and favorable pricing trends in the agricultural equipment market, where the company commands a significant market share. They also predict an improvement in grain markets, which could help shrink the valuation gap between CNH and its leading competitor, Deere & Company.

Raymond James expects CNH to benefit from its investments in technology, particularly its precision agriculture initiatives, which are projected to enhance operational efficiencies over the coming years. The firm estimates that CNH will achieve cost reductions of approximately $0.10 per share, equating to about 10% by 2025.

Additionally, analysts forecast a price-to-earnings ratio of around 11x for CNH’s 2025 earnings per share, which they regard as an attractive entry level, especially considering the cyclical challenges within the agricultural machinery industry.

Despite facing an oversupply of both new and used inventory and soft demand expectations for the upcoming retail sales cycle, Raymond James believes that CNH’s current valuation already accounts for prevailing investor skepticism. The stock, trading at $10.80 as of September 23, 2024, presents a favorable risk/reward profile, supported by anticipated cost savings and industry-wide recovery by mid-2025.

CNH shares have had a 52-week trading range between $9.28 and $13.30, grappling with difficulties stemming from uncertainties in global grain markets and variable farmer profits. Nevertheless, with prospects of recovering grain markets and supportive macroeconomic factors like potential interest rate cuts and beneficial U.S. tax policies, Raymond James perceives a chance for CNH to overcome its recent struggles and align more closely with its industry peers.