CNH Industrial Reports Q2 2026 Results: Full Earnings Call Transcript

On Monday, CNH Industrial (NYSE: CNH ) discussed second-quarter financial results during its earnings call. The full transcript is provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

8 billion, up 2% year-over-year, with an adjusted EBIT of $167 million, impacted by lower demand and tariffs. Strategic initiatives include dealer consolidation and a strategic sourcing program aimed at improving supply chain efficiency and margin improvements by 2030. The company anticipates an L-shaped recovery in the agriculture market, with 2027 retail demand expected to remain flat, primarily driven by replacement demand. Operational highlights include positive developments in dealer inventory normalization and ongoing investments in precision technology and connected solutions.

Management emphasized continued commitment to long-term strategies and addressing tariff impacts, with some relief expected from lower Section 232 tariff rates. Full Transcript OPERATOR Good morning and welcome to the CNH Industrial 2026 Second Quarter Results Conference Call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand.

To withdraw your question, press star one again. I will now turn the call over to Jason Omerza, Vice President of Investor Relations. Jason Omerza, Vice President of Investor Relations Thank you, Paige, and good morning, everyone. We would like to welcome you to CNH Industrial's second quarter earnings call for the period ending June 30, 2026.

This live webcast is copyrighted by CNH Industrial and any recording, transmission, or other use of any portion of it without the written consent of CNH Industrial is strictly prohibited. Hosting today's call are CNH Industrial CEO Gerrit Marx and CFO Jim Nicholas. They will reference the material available for download from our website. Please note that any forward-looking statements that we make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor Statement included in the presentation material.

S. Securities and Exchange Commission. Our presentation includes certain non-GAAP financial measures. S.

GAAP financial measures, is included in the presentation material. I will now turn the call over to Gerrit. Gerrit Marx, CEO Thank you, Jason, and welcome to everyone joining the call. Second quarter results were generally in line with our expectations as we continued managing through a difficult point in the agricultural equipment cycle.

Operationally, we are making good use of this period to drive improvements in quality, sourcing, and manufacturing efficiency. These actions are supporting performance today while strengthening our foundation for the future. We also continue advancing our precision technology capabilities with increasing adoption of connected and AI-enabled solutions across our installed base and dealer network. While overall market conditions remain challenging, particularly given pressured farmer profitability, we are seeing encouraging developments in several but not yet all equipment cycle indicators.

As we think about the eventual recovery in our end markets, we find it helpful to focus on a handful of indicators that have historically provided a good signal for both the timing and strength of the next up cycle. First, channel inventories of new machines need to normalize in line with near-term three to five forward months of sales demand depending on the machine type and support a steady production environment. Second, used equipment inventories need to return to healthy levels, creating the financial and physical capacity for dealers to manage new equipment flow-through.

Third, the spread between new and used equipment values needs to normalize, allowing farmers to trade equipment economically, supporting replacement demand. Fourth, commodity prices need to move sustainably above production cost and provide farmers with confidence that current profitability levels are durable enough to carry new equipment investments. And fifth, farmers generally need a profitable season behind them and confidence in another profitable season ahead before replacement demand broadens.

In addition, something that helps, but is not necessarily a demand driver, is government assistance programs and interest rates—farm bills that subsidize crop insurance or borrowing rates, for example. This is all helpful, but it does not set the market recovery in motion. The industry is making good progress on the first three indicators across our major regions, although there is still work to do through year-end. Dealer new and used inventories continue to normalize, equipment fleets continue to age, and the price gap between new and used equipment has begun to converge following several years of divergence.

What remains largely absent are the fourth and fifth indicators. Commodity prices remain at or below break-even levels for many growers, while fuel, fertilizer, and transportation costs remain elevated. As a result, overall farm profitability remains under pressure, and farmers remain cautious with larger capital investment decisions. When we put all these factors together, our baseline expectation is for an L-shaped recovery, with 2027 retail demand remaining broadly flat, with replacement demand continuing to carry much of the market.

As inventories normalize, we expect to increase production to better align with retail demand. Beyond replacement demand, however, it will take stronger farm profitability and greater farmer confidence to support a more pronounced industry recovery. While we don't yet see evidence of a sustained recovery, conditions are becoming more constructive, and several of the foundational elements required for the next phase of the cycle are falling into place. Turning to the results, our second quarter performance reflects seasonal sequential volume improvements after a low Q1 and continued disciplined execution across the business.

8 billion, up 2% year over year, including about 2% positive currency impacts. Our Ag segment sales were up 1%, with North America up 10%, EMEA up 1%, but South America down 27%. With farm incomes depressed and macroeconomic uncertainty, we saw continued softness in equipment demand. Industrial adjusted EBIT was $167 million, reflecting lower industry demand as well as the continued impact of tariffs.

These factors were only partially offset by positive pricing and cost-saving actions. For the quarter, adjusted net income was $161 million, with adjusted EPS at 13 cents. Free cash flow from industrial activities was $150 million, a year-over-year decline due to lower EBIT and higher working capital investments. We remain fully committed to our long-term strategy and delivering sustainable value through the cycle.

Our company strategy is centered around five key strategic pillars: expanding product leadership, advancing our iron and tech integration, driving commercial excellence, operational excellence, and quality as a mindset. Even in a challenging market environment, we continue investing in the capabilities that will differentiate CNH Industrial over the long term and position us strongly for the next cycle. Today I would like to focus on the progress we are making in our dealer consolidation efforts and our strategic sourcing program. In February we told you about some flagship transactions around the world where we are expanding and consolidating our dealer network.

Today I'm going to review a few more success stories with you. Splintered Oak in East Texas is an example of a dealer expanding its territory. We also have dealer owners expanding to both brands, such as Grits in Wisconsin, ATV Sachsen in Germany, and Kokri in Brazil, all expanding into dual brands through acquisitions of Case IH locations. Expanding our dealers' reach not only helps their ability to service farmers in their markets, it also helps focus our strong and iconic brands—more individually and in their collective lineup—to compete more effectively in the marketplace.

We're getting ready to officially launch the next wave of our strategic sourcing program next month with our supplier convention in Amsterdam, so I thought I would take the opportunity to remind you what this program is and what it is delivering. The program is a disciplined process where we identify potential suppliers alongside our existing vendors and conduct rigorous evaluations to achieve the best supply chain for CNH Industrial. The goal is not just material cost reductions, although that is certainly one of the outcomes.

We are also looking for a supply base that can grow with us, deliver outstanding quality, service production and aftermarket demands, and work with us on finding the best total value for our farmers and builders. The program has been a great success so far, and we are well on our way to meeting our target of adding 100 to 150 basis points of margin improvement from this sourcing effect alone by 2030. I look forward to meeting with our next wave of prospective suppliers in September and continuing this important transformation. With that, I will now turn the call over to Jim to take us through the details of our financial guidance.

Oddone Incisa, Chief Financial Officer Thank you, Gerrit. 3 billion, up 1% year over year, including 2% positive currency translation. North America saw higher year-over-year volume and pricing, while South America was down on both fronts. Sales in EMEA were about flat.

8% a year ago. While sales were about flat overall, we saw unfavorable product mix in North America, with large tractors down more than small tractors, and in South America, with combines down more than tractors. 1% in Q2 2025, reflecting the unfavorable product mix and the tariff headwinds, with positive pricing only partially offsetting these pressures. The good news is that price/cost was again positive for the quarter, and we expect that to be true for the full year as well.

Dealer inventories were slightly down sequentially, but we would say almost flat by region. Inventories were down in North and South America, but were partially offset by increases in EMEA, where retail demand was softer than expected. We are working toward reducing dealer inventory by another $400 to $500 million by year end, and our timing was always weighted more toward the fourth quarter. Construction net sales in the quarter were up 12% year over year to $866 million, driven by higher sales in North America.

Performance in North America was strong, driven by volume growth, which included some of the machine shipments that were delayed in Q1 as a result of the supplier quality issue that we discussed last quarter. EMEA saw modest volume growth supported by favorable currency, while South America saw the most challenging conditions during the quarter. 7% a year ago, where the decline was mainly driven by the impact of the tariffs. 5% in Q2 2025, reflecting significantly higher tariffs, which more than offset the strong volume performance.

In Financial Services, segment net income in the quarter was $71 million, down versus 2025, mainly due to margin compression in all regions and higher risk costs in Brazil, partially offset by a lower effective tax rate. 5 billion, and the managed portfolio ended the quarter at $28 billion. 4% but were higher year over year, primarily driven by the persistent economic difficulties in South America. 01 of non-recurring EPS benefit.

This quarter our capital allocation priorities remain the same: reinvesting in our business while maintaining a healthy balance sheet, and then returning cash to shareholders. 31 per share. Before we dive into our guidance, let's take a look at the expected tariff impact on our margins, as we had a change recently in the way Section 232 will be applied to some of our products. Under this updated rule, tariffs on certain categories of equipment have been reduced to 15% from 25% in our Agriculture business.

That brings down the expected 2026 tariff cost impact to about 170 basis points. For Construction, we now forecast about a 470 basis point impact. As we've previously outlined, Construction is more heavily impacted than Agriculture given its higher exposure to imported finished equipment and higher percentage of sales in North America. It's important to remind everyone that we have not passed all the tariff impacts on to our customers.

Even with this temporary relief of Section 232 rates, it is still a net drag on our margins, and we won't see all the benefit of this reduction drop to the bottom line either, as there have been other recent cost impacts, notably higher transportation costs due to the shipping lane disruptions. But certainly this reduction in tariff rates is a welcome benefit. We are reviewing the recent Section 301 tariffs for forced labor that went into effect 10 days ago. At this point we think the impact to CNH will be minimal, but there are still ongoing Section 301 investigations on excess capacity.

We have not included any factors for that or any potential impacts from the non-renewal of the USMCA in this forecast. We will provide an update if there are material changes at these levels. We expect Q3 2026 tariffs to be about flat year over year, whereas Q4 tariffs should actually be a little lower year over year. On a run-rate basis, the tariffs will be a little lower in 2027 as we get the full-year benefit of the reduced Section 232 rates.

With that, let me address IPA-related tariff recoveries, which are also not included in the numbers shown on this page. In the second quarter, we received $5 million of refunds as part of the phase one claims process. Now that phase two is open, we are in the process of filing approximately $135 million in claims. We are accounting for the refunds as gain contingencies and will therefore recognize them when they are received.

As the timing of the refund receipt is uncertain, they are not included in the guidance that we will review in a moment. In addition to the $135 million in phase two claims, we estimate to have about $15 million in claims to be filed in phase three whenever that becomes available to us. When these refunds are received, we do intend to redeploy a meaningful portion by reinvesting them in discrete projects benefiting the business. This could include accelerating investments in precision technology, upgrades to our manufacturing facilities, or providing limited-term incentives to accelerate inventory destocking, among other areas.

Let's now look together at our Agriculture industry outlook for 2026. We have made tweaks to some of the numbers, mainly based on how we have seen the first half develop. Overall it is net lower, with reductions in small tractors in North America and in combines in EMEA and South America. That still puts us at about 80% of mid-cycle when balancing all the products together.

With our order slots now nearly full for the year, we are moving our net sales guidance to the high end of our previous range. We now forecast sales to be about flat year over year. 5% to 2%, offset by lower unit shipments as a result of the industry demand. Agriculture production hours will be down slightly year over year.

The updated Section 232 tariff rates are providing some cost relief, but this has been largely offset by increased freight and transportation costs, as well as continued market challenges in South America. Despite this, we are confident in our ongoing cost-reduction programs and manufacturing performance. 5%. In Construction, we have also fine-tuned our industry forecast across the regions based on first-half trends and market conditions, and overall we are more positive in overall outlook, especially for heavy equipment.

With the healthy construction markets and our own success in the field, we are raising our net sales guidance up to 5% to 10% year over year, including about 2% of favorable currency translation and 1% to 1% of pricing. 3%, as the improvement in sales levels and tariff rates positively impact our profitability. Production hours in the Construction segment will be up to support the year-over-year increase in sales. 8%.

Industrial free cash flow is now forecasted to be between $200 and $400 million on slightly improved sales and lower working capital assumptions.