CNH delivered second-quarter results broadly in line with expectations, reporting consolidated revenues of $4.8bn, up 2% year-on-year, while adjusted earnings per share came in at $0.13.
The results offered little evidence that the global farm equipment downturn is ending. CEO Gerrit Marx said farmer profitability remains under pressure across most regions, with commodity prices still hovering around or below break-even levels for many growers while input costs remain stubbornly high.
As a result, farmers continue to delay major machinery purchases beyond essential replacement demand.
“We don’t yet see evidence of a sustained recovery,” Marx told analysts, describing CNH’s outlook as an “L-shaped recovery” with retail demand in 2027 expected to remain broadly flat.
Instead, the company is watching a series of market indicators, including dealer inventories, used machinery stocks, equipment fleet age and the spread between new and used machinery prices. While those indicators are moving in the right direction, CNH believes improved farm profitability will ultimately be required before equipment demand accelerates meaningfully.
Dealer inventory reduction remains a priority
A central focus for CNH remains reducing dealer inventories and aligning production with actual retail demand.
CFO Jim Nickolas said inventories were slightly lower sequentially during the quarter, with reductions in North and South America partially offset by higher stocks in Europe, where demand softened unexpectedly.
CNH is targeting a further $400m-$500m reduction in dealer inventory by the end of the year, with most of the progress expected during the fourth quarter.
Marx argued that production restraint today should become a tailwind tomorrow.
“Producing in line with retail demand in 2027 means we have an automatic tailwind next year since we are currently underproducing to the 2026 demand by about 4%,” he said.
The company believes normalising inventory levels will help protect pricing, support dealers and position production for a healthier market environment next year.
Technology investment continues despite downturn
While some manufacturers are pulling back spending during the current cycle, CNH is continuing to invest in what it calls its “Iron and Tech” strategy.
Marx highlighted growing adoption of connected and AI-enabled technologies across CNH’s installed equipment base and dealer network. The company also reiterated plans to reinvest any future tariff-related refunds into areas such as precision agriculture technology, manufacturing upgrades and initiatives designed to accelerate dealer inventory reductions.
“We will continue to make sustained investments in both our iron and our technology capabilities,” Marx said.
“Our goal is to bring those together in ways that improve productivity for customers, increase adoption in connected and AI-enabled solutions, and further differentiate CNH over the long term.”
The strategy reflects CNH’s view that technology adoption will remain a key differentiator once cyclical demand improves, particularly in precision agriculture and connected farm operations.
Margin expansion plan moves ahead
Although agricultural machinery markets remain weak, management expressed confidence that internal improvement programmes are beginning to deliver measurable benefits.
A major lever is CNH’s strategic sourcing initiative, through which the company is reassessing suppliers to lower material costs while improving quality and supply chain performance.
Marx said the programme remains on track to contribute 100 to 150 basis points of margin improvement by 2030.
At the same time, CNH is pursuing manufacturing efficiency projects, quality improvements and procurement savings that management believes will continue supporting profitability even in a flat market.
During the call, executives repeatedly pointed to sourcing, operational efficiency and pricing discipline as key contributors to future earnings growth.
“We feel confident about printing a proposal for next year that should be no less than what we do this year,” Marx said, referring to earnings performance in a scenario where agricultural demand remains broadly flat.
Construction provides a bright spot
While agriculture remains sluggish, CNH’s construction division continues to benefit from stronger end markets.
Construction sales rose 12% year-on-year to $866m, driven by higher volumes in North America and improving demand linked to infrastructure projects, data centres and power generation investments.
Reflecting that momentum, CNH increased its full-year outlook for construction, forecasting revenue growth of 5%-10% and raising its margin expectations.
Executives also confirmed that discussions with potential strategic partners in construction have resumed, with a focus on improving scale, competitiveness and access to new technologies.
Outlook: patience required
CNH shares rose after the results because they were better than investors had feared, even though profits and sales were down sharply.
For investors, the key takeaway was that CNH’s outlook did not deteriorate despite ongoing agricultural weakness.
The company raised guidance for construction, moved agricultural sales expectations to the high end of its previous range and narrowed agricultural margin guidance to 5%-5.5%.
More importantly, management’s commentary suggested confidence that inventory correction, operational improvements and technology investments are positioning the business for stronger profitability when agricultural markets eventually recover.
