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CNH
Earnings call · Jun 2026 (Q2 FY26)

CNH Industrial N.V. Q2 FY26 earnings call CNH

Aug 3, 2026 Source

Executive summary

CNH Q2 FY26 — Operational Improvements Drive Margin Resilience Amidst Challenging Ag Market

CNH navigated a challenging agricultural equipment cycle in Q2 FY26 with resilient operational execution and strategic initiatives. While farm profitability pressures and tariffs impacted margins, strong performance in North America and the Construction segment, coupled with ongoing cost reduction and dealer consolidation efforts, supported results. The company anticipates an L-shaped recovery for agriculture, focusing on internal efficiencies and market share gains while exploring strategic partnerships for its construction business.

Highlights

5

  • Consolidated revenues increased 2% year-over-year to $4.8 billion, including 2% positive currency impacts.

  • Agriculture segment sales were up 1%, with North America sales growing 10%.

  • Construction net sales rose 12% year-over-year to $866 million, driven by strong North America volume growth.

  • Strategic sourcing program is on track to add 100-150 basis points to margin by 2030.

  • The company achieved market share gains in Ag across tractors and combines in EMEA, North America, and South America.

Concerns

5

  • Industrial adjusted EBIT was $167 million, reflecting lower industry demand and continued tariff impacts.

  • Agriculture adjusted EBIT margin declined to 5.2% from 8.1% in Q2 2025 due to unfavorable product mix and tariffs.

  • Construction adjusted EBIT margin fell to 1.7% from 4.5% in Q2 2025, primarily driven by significantly higher tariffs.

  • Free cash flow from Industrial Activities was $150 million, a year-over-year decline due to lower EBIT and higher working capital investments.

  • Financial Services net income was down due to margin compression and higher risk costs in Brazil, with delinquency rates at 4.4%.

Guidance & targets

CategoryTargetConfidence
Industrial Net Sales
flat to up 2% year-over-year
high materiality
High
Industrial Adjusted EBIT Margin
between 3.2% and 3.8%
high materiality
High
Industrial Free Cash Flow
between $200 million and $400 million
high materiality
High
Adjusted EPS
between $0.41 and $0.46
high materiality
High
Agriculture Net Sales
about flat year-over-year
medium materiality
High
Agriculture EBIT Margin
5% to 5.5%
medium materiality
High
Construction Net Sales
up to 5% to 10% year-over-year
medium materiality
High
Construction EBIT Margin
between 1.8% and 2.3%
medium materiality
High
Agriculture Q3 Net Sales
about flat on a year-over-year basis
low materiality
Medium
Agriculture Q3 EBIT Margin
about flat on a year-over-year basis
low materiality
Medium
Construction Q3 Global Sales
up in the low to mid-teens year-over-year
low materiality
Medium
Construction Q3 EBIT Margin
improve year-over-year to a low to mid-single-digit range
low materiality
Medium
Financial Services Q3 Net Income
expected to improve year-over-year off a low base
low materiality
Medium
Strategic Sourcing Margin Improvement
100 to 150 basis point margin improvement
medium materiality
High
2027 Ag Retail Demand
flattish 2027 industry retail demand
high materiality
Low
2027 Production Levels (Ag)
increased production to better align with retail demand
medium materiality
High
2027 Tariff Impact
a little lower
medium materiality
Medium
2027 Earnings
no less than what we do this year
high materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Agriculture
Sales growth was driven by North America and positive currency, but South America saw significant declines. Margins were impacted by unfavorable product mix and tariffs, partially offset by positive pricing and cost-saving actions.
Gross margin: 19.7%Gross margin a year ago: 21.8%Adjusted EBIT margin a year ago: 8.1%North America sales growth: 10%EMEA sales: about flatSouth America sales decline: 27%Positive currency translation: 2%Unfavorable product mix in North America (large tractors down more than small tractors)Unfavorable product mix in South America (combines down more than tractors)Price cost: positive for the quarter and expected for full year
$3.3 billion1%—5.2%
Construction
Strong sales growth, primarily from North America, which included delayed Q1 shipments. However, margins were significantly impacted by higher tariffs, offsetting strong volume performance.
Gross margin: 11.9%Gross margin a year ago: 15.7%Adjusted EBIT margin a year ago: 4.5%Sales growth driven by North AmericaEMEA saw modest volume growthSouth America saw most challenging conditions
$866 million12%—1.7%
Financial Services
Net income declined due to margin compression and increased risk costs, particularly in Brazil, despite a lower effective tax rate. Delinquency rates rose seasonally and year-over-year.
Net income: $71 millionRetail originations: $2.5 billionManaged portfolio: $28 billionDelinquency rates: 4.4%Net income down versus 2025 due to margin compression in all regions and higher risk costs in BrazilPartially offset by a lower effective tax rateDelinquency rates higher year-over-year due to persistent economic difficulties in South America
————

Deals & partnerships

several potential partners exploring different collaboration models to upgrade construction segment's economies of scale, geographic reach, competitiveness (heavy excavators), and breadth/depth/technologies of construction machines supplied through agriculture network

CNH has restarted conversations with several potential partners in the construction space, exploring different collaboration models. The goal is to profoundly upgrade the construction segment and enhance the construction machines supplied through their agriculture network.

Risks & headwinds

Challenging Agricultural Equipment Cycle ongoing

difficult point in the agricultural equipment cycle

Mitigation:driving improvements in quality, sourcing and manufacturing efficiency; investing in precision technology capabilities

Farm Profitability & Input Costs ongoing

overall farm profitability remains under pressure; commodity prices remain at or below breakeven levels; fuel, fertilizer and transportation costs remain elevated

Mitigation:maintaining production discipline; focusing on operational efficiency

Tariffs FY26 and into 2027

continued impact of tariffs; significantly higher tariffs impacting Construction EBIT margin; still a net drag on margins even with reduced Section 232 rates

Mitigation:cost reduction programs; manufacturing performance; IEEPA refund claims and reinvestment

South America Market Conditions Q2 FY26 and Q3 FY26

Ag sales down 27%; Construction saw most challenging conditions; higher risk costs in Brazil for Financial Services; delinquency rates higher year-over-year

Mitigation:keeping an eye on market conditions; managing production volumes accordingly

Increased Freight and Transportation Costs Q2 FY26 and ongoing

largely offset by increased freight and transportation costs due to the shipping lane disruptions

Mitigation:cost reduction programs; manufacturing performance

Financial Services Delinquency Rates Q2 FY26 and ongoing

seasonal uptick in Q2 to 4.4%, higher year-over-year

Mitigation:adequate reserves; watching market dynamics

Weather/Drought in EMEA Q2 FY26

extremely hot weather, drought conditions hurting crops and sentiment

Mitigation:managed production volumes accordingly

What to watch in Q3 FY26

Model Year 2027 Ag Order Intake

next quarter
Current flattish 2027 industry retail demand (early indication)
Target Higher equipment demand / stronger recovery signal

Why it matters

Key indicator for the timing and strength of the next agricultural up cycle.

We're closely watching model year 2027 order intake as one of the clearest indicators of where the agriculture cycle is headed. So far, order intake would indicate a flattish 2027 industry retail demand, but we are still early in the process.

Q&A highlights

Seeking color on the step-up in Q4 Ag performance and how to think about 2027 margins given the exit rate.

Jim Nickolas attributed Q4 strength to higher volumes, lower tariffs (favorable comp vs. last year and sequentially), positive pricing, and continued operational improvements. He clarified that Q4 is typically the best quarter and not a direct launchpad for full-year 2027 margins, but highlighted momentum.

“So I'd say volumes and lower tariffs are primary, followed by pricing and operational improvements coming in next.”

asked by Charles Albert Dillard · answered by James A. Nickolas

2 min read 6 chapters

Detailed narrative

Agricultural Market Recovery Indicators

Management outlined five key indicators for an agricultural market recovery: normalization of new and used equipment inventories, convergence of new and used equipment values, commodity prices sustainably above production costs, and farmer confidence from profitable seasons. While the first three are progressing, the latter two, particularly farm profitability, remain challenged, leading to an L-shaped recovery expectation for 2027. The company noted that government assistance programs and interest rates are helpful but do not set the market recovery in motion.

Strategic Sourcing Program Progress

CNH is launching the next wave of its strategic sourcing program, with a supplier convention scheduled for next month. This disciplined process aims to identify potential new suppliers and rigorously evaluate existing vendors to achieve the best supply chain. The program's goal extends beyond material cost reductions to building a supply base that supports growth, outstanding quality, service production, and aftermarket demand, with an objective of adding 100 to 150 basis points to margin by 2030.

Dealer Network Consolidation Efforts

The company continues to expand and consolidate its dealer network, citing examples like Splintered Oak in East Texas and Gruett's in Wisconsin, which are expanding into dual brands through acquisitions. This strategy is designed to enhance customer service, strengthen aftermarket support, and improve market competitiveness by focusing on individual brands and their collective lineup. Management emphasized that these efforts are not a drag on performance but rather contribute to more effective market penetration.

Updated Tariff Impact and IEEPA Refunds

CNH provided an updated view on tariff impacts, noting that Section 232 rates have been reduced to 15% from 25% for certain products. This lowers the expected 2026 tariff cost impact to 170 basis points for agriculture and 470 basis points for construction. The company received $5 million in IEEPA refunds in Q2 and is filing claims for an additional $135 million (Phase 2) and an estimated $15 million (Phase 3), with plans to reinvest these funds into precision technology upgrades and manufacturing facilities.

Construction Segment Strategic Review

CNH has restarted discussions with several potential partners in the construction space to explore collaboration models. The objective is to profoundly upgrade the construction segment's economies of scale, geographic reach, and competitiveness, particularly for heavy excavators. Additionally, these partnerships aim to enhance the breadth, depth, and technologies of construction machines supplied through CNH's agriculture network, with updates to be provided as progress is made.

Production Discipline and 2027 Outlook

The company is maintaining production discipline to achieve leaner dealer inventories by year-end, targeting a reduction of $400 million to $500 million. Management expects to increase production in 2027 to align with retail demand, which is currently projected to be flattish, providing an automatic tailwind as CNH is currently underproducing 2026 demand by about 4%. This alignment, combined with ongoing operational improvements and favorable price/cost dynamics, is expected to support earnings in 2027.

AI-generated summary of the company's earnings call. Not investment advice.