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On Monday, Bernstein analysts at SocGen Group revised their rating on CNH Global shares (NYSE:CNH), elevating the stock from Market Perform to Outperform. Accompanying the upgrade, they also increased the price target to $17.00, a significant rise from the previous target of $11.00. The new target sits near the high end of analyst estimates, which currently range from $10 to $18, according to InvestingPro data.
The upgrade reflects Bernstein's confidence in CNH Global's future performance, underpinned by a detailed analysis. The analysts believe that CNH's sales will rebound to their peak levels by 2028, despite current InvestingPro data showing revenue of $21.75B and a projected sales decline for the current year. They also suggest that the impact of the price-cost spread on profit margins is less severe than previously assumed, with the company maintaining a healthy gross profit margin of 21.6%.
In their evaluation, Bernstein points out that CNH Global's workforce and fixed cost base are manageable and can be reduced efficiently. Their peer-group comparison indicates that dealer inventories, finance receivables, and finished goods are likely at their peak and should not pose a significant risk moving forward. This assessment is supported by the company's strong liquidity position, with InvestingPro data showing a robust current ratio of 4.86 and liquid assets exceeding short-term obligations.
The analysts also express optimism about the direction under new CEO Scott W. Wine, formerly known as Marx in the context. They anticipate that his leadership will ensure a 'soft landing' for the company. Moreover, Bernstein predicts that the market is prepared to overlook the potential trough in earnings for the year 2025, implying a short-term dip in financial performance.
Bernstein justifies the new price target by applying an 18 times price-to-earnings (PE) ratio to CNH Global's stock, which captures the cyclical nature of the company's earnings and market position. The higher target price and stock rating upgrade are based on the firm's comprehensive analysis and expectations of the company's strategic management and market conditions.
In other recent news, CNH Global reported lower-than-expected third-quarter earnings and revised its full-year 2024 guidance downward. The company reported adjusted earnings per share of $0.24, missing the anticipated $0.27 mark. However, CNH Global's revenue of $4.65 billion exceeded the consensus estimate of $4.4 billion, despite a 22% year-on-year decline.
In the wake of these developments, Northland downgraded CNH Global shares from Outperform to Market Perform, maintaining a steady price target of $18.00. The firm signaled it might reconsider an upgrade upon observing signs of market stabilization.
CNH Global also revealed plans for significant production cuts in the first half of 2025 to adjust dealer inventories to match waning demand. This strategic move reflects the company's response to a challenging market environment.
CNH Global's full-year 2024 EPS guidance was adjusted to a range of $1.05 to $1.15, significantly lower than the previous forecast of $1.30 to $1.40 and analyst expectations of $1.23. Lastly, the company revised its free cash flow guidance for 2024, now expecting an outflow of $100 million to $300 million, contrasting with its previous forecast of an inflow of $700 million to $900 million.
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