Shares of CNH Industrial (NYSE: CNHI) increased by 1% in pre-market trading on Tuesday, following an upgrade from Raymond James. The investment firm has shifted its rating of CNH Industrial from “market perform” to “outperform.”
This upgraded perspective comes after a period of underperformance by CNH, which Raymond James analysts now view as a promising entry point for investors. The analysts have set a price target of $14 for CNH, indicating a potential upside of approximately 34%, inclusive of a 4.4% dividend yield.
Raymond James analysts forecast that CNH will maintain margin resilience through cost-cutting measures and favorable industry pricing, especially within the agricultural equipment sector where CNH holds a significant market share. Additionally, an anticipated improvement in grain markets is expected to reduce the valuation disparity between CNH and its main competitor, Deere & Company (NYSE: DE).
The upgrade is bolstered by the expectation that CNH’s investments in technology, particularly in precision agriculture, will enhance operational efficiencies over the coming years. Raymond James projects CNH to achieve cost reductions by 2025, estimated at $0.10 per share, roughly equating to a 10% reduction.
Furthermore, the analysts foresee CNH’s price-to-earnings ratio reaching approximately 11 times the 2025 earnings per share, which they consider an attractive entry point due to current cyclical challenges in the agricultural machinery sector.
Despite an oversupply of new and used inventories on dealership lots and soft demand projections for the coming retail sales year, Raymond James believes that CNH’s valuation already accounts for investor skepticism. The stock, trading at $10.80 as of September 23, 2024, presents a balanced risk/reward profile, with potential upside driven by specific cost savings and a sector-wide recovery anticipated by mid-2025.
CNH shares, featuring a 52-week range between $9.28 and $13.30, have faced headwinds due to uncertainties in global grain markets and fluctuating farmer earnings. Nonetheless, with expected recovery in grain markets and supportive macroeconomic conditions—such as potential interest rate reductions and favorable U.S. tax policies—Raymond James identifies an opportunity for CNH to overcome its recent slow performance and align more closely with its peers.