Sustainable Connected Agriculture Will Redefine Global Markets

Key Takeaways

• Aggressive tech integration, improved production alignment, and strategic pricing are set to drive substantial gains in margins and long-term earnings visibility above consensus expectations.
  
• Strengthened positioning in emerging markets and the shift toward sustainable, tech-enabled farming will deliver lasting cost advantages and premium market share.
  
• Regulatory pressures, market demographic shifts, emerging market instability, regional sales reliance, and geopolitical trade risks collectively threaten CNH Industrial's profitability and long-term growth prospects.

Catalysts

An equipment and services company, engages in the design, production, marketing, sale, and financing of agricultural and construction equipment in North America, Europe, the Middle East, Africa, South America, and the Asia Pacific.

• Analysts broadly agree that CNH's dealer inventory drawdown and alignment of production with true retail demand set the stage for a volume snapback, but this could be heavily understated-an extended period of underproduction in high-profit North America will likely spark an outsized rebound in 2026 revenues and margins as normalized dealer pipelines coincide with model year upgrades and improved mix.
  
• The analyst consensus expects moderate benefit from cost control and price, but CNH's aggressive pricing on model year 2026-driven by significant new tech features and heightened trade-driven industry pricing-combined with a steep decline in quality expenses, positions net margins for an expansion well above market forecasts as competitors face more input cost pressure and discounting on legacy products.
  
• The rollout of Starlink-enabled, always-on connectivity and the integration of digital platforms like FieldOps will dramatically accelerate adoption of precision ag solutions, unlocking higher-margin recurring software and data revenues that materially lift both gross margins and long-term earnings visibility.
  
• CNH's deepening footprint and "engineering hub" investments in India and emerging markets enable not only rapid market share gains in fast-growing regions, but also drive step-function gains in global sourcing and manufacturing efficiency-supporting sustained cost advantage and earnings resiliency as global demand cycles normalize.
  
• The accelerating shift to sustainable, tech-enabled, and large-scale farming globally is set to disproportionately benefit CNH, whose ramping portfolio of automated equipment, alternative powertrains, and connected aftermarket solutions is uniquely positioned to capture premium share and command structurally higher returns through the next decade.

CNH Industrial Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on CNH Industrial compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming CNH Industrial's revenue will grow by 3.5% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.6% today to 11.4% in 3 years time.
• The bullish analysts expect earnings to reach $2.3 billion (and earnings per share of $1.82) by about August 2028, up from $823.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 15.5x on those 2028 earnings, down from 18.9x today. This future PE is lower than the current PE for the US Machinery industry at 23.2x.
• Analysts expect the number of shares outstanding to decline by 0.24% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.28%, as per the Simply Wall St company report.

CNH Industrial Future Earnings Per Share Growth

Risks

• CNH Industrial faces rising regulatory pressure to reduce carbon emissions, which may increase the cost of transitioning away from traditional diesel-powered equipment and ultimately compress margins as the company invests heavily in R&D and compliance.
  
• Declining rural populations in key developed markets such as North America and Europe are likely to drive down long-term demand for agricultural machinery, limiting volume growth and putting downward pressure on revenues.
  
• Persistent underperformance in emerging markets, particularly South America where CNH experienced higher delinquencies and cyclical downturns, creates earnings volatility and exposes consolidated profits to unpredictable currency and economic swings.
  
• The company's heavy reliance on North America for high-margin agricultural equipment sales, combined with a 36% decline in North American ag sales this quarter and ongoing dealer inventory destocking, significantly threatens future earnings and margin stability if recovery is sluggish.
  
• Accelerating trade barriers, supply chain disruptions, and tariff uncertainties-especially the risk of retaliatory actions between the US, Brazil, and China-raise the likelihood of increased input costs and delivery challenges, which could further erode net margins and dilute profitability over time.

Valuation

• The assumed bullish price target for CNH Industrial is $19.61, which represents two standard deviations above the consensus price target of $15.22. This valuation is based on what can be assumed as the expectations of CNH Industrial's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $21.0, and the most bearish reporting a price target of just $11.5.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $20.1 billion, earnings will come to $2.3 billion, and it would be trading on a PE ratio of 15.5x, assuming you use a discount rate of 13.3%.
  
• Given the current share price of $12.44, the bullish analyst price target of $19.61 is 36.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.