In a move to expand in the Latin-American market, Case New Holland (CNH) recently announced a new strategic partnership with Semeato, which specializes in attachments and agricultural machinery and technologies for no-till planting and seeding of grains.
Management stated that the partnership will enable both the companies to make further use of their respective areas of expertise: CNH with tractors, sprayers, combines, forage and other agricultural equipment of all classes and power ranges; and Semeato with leading technology on planters and seeders in Latin America.
Further, Case New Holland’s and Semeato’s strategic long-term alliance will include other collaboration areas to drive CNH leadership in the Latin American market.
Additionally, the engineering departments of the two companies will develop products that will be jointly designed to maximize performance of the CNH tractor lines. Management expects that through this agreement, CNH will be able to offer planters and seeders various kinds of services, regardless of size or activity within agribusiness.
Incorporated in the Netherlands, CNH, a manufacturer of agricultural and construction equipment was formed in 1999, following the merger of New Holland N.V. and Case Corporation.
In July 2011, Case New Holland posted a net income before restructuring and exceptional items of $320 million or $1.33 per share in the second quarter of 2011, which soared from a net income of $140 million or 59 cents in the year-earlier quarter. The earnings results were ahead of the Zacks Consensus Estimate of 99 cents per share.
Net sales of Equipment, excluding revenue from Financial Services were $4.88 billion, up 24% from the year-earlier quarter, driven by double-digit growth across Agricultural Equipment and Construction Equipment.
On a segmental basis, revenues from Agricultural Equipment were $3.9 billion, up 22% from the year-earlier quarter, led by favorable trading conditions across all regions.
Revenues from Construction Equipment were $1030 million, up 30% from the year-earlier quarter, led by improvements in market conditions in all regions, especially the North American markets.
For fiscal 2011, management expects strong demand in the agricultural and construction equipment markets, driven by a favorable environment for agricultural commodity prices and an improvement in the Construction Equipment.
Based on the company’s performance, management upgraded its fiscal 2011 revenue guidance to 15%-20%, up from the previous expectation of a 10% growth. The company also expects operating margin at the upper end of its previous guidance of 7.1% to 7.9%.
We currently have a Neutral recommendation on the stock, which currently carries a Zacks #1 Rank (short-term Strong Buy rating), primarily due to management’s upgrade in the guidance.
