CNH Global (CNH) shares are sliding, but that has just made the valuations look enticing.
With rising estimates pushing shares to a Zacks #1 Rank (Strong Buy) and padding the growth rates, this beaten down stock has plenty of potential.
Company Description
CNH Global makes agricultural and construction equipment, selling in about 170 countries.
Profit Jumps 71%
Back in April CNH Global announced quarterly results that showed a 17% increase in sales, to $3.8 billion. Operating profit rose 71%, to $246 million.
Net income worked out to $0.57 per share, which was more than triple the $0.16 from a year ago and was 14 cents higher than the Zacks Consensus Estimate. This marked the third consecutive earnings surprise.
Consensus Moves Higher
After the earnings news analysts began raising their full-year estimates. In the past 3 months the 2011 average forecast rose 27 cents to $2.94, including 2 upward revisions in the past month.
Next year’s consensus is up 22 cents, to $3.61. Last year the company brought in $2.08 per share, putting expected growth rates at 41% and 23%, respectively.
Cheap Valuations
Shares of CNH are going for just 12 times the forward earnings estimates, which give it a PEG of 1.3. The price to book is at 1.1 times and the price to sales is just 0.5. All showing a good value story, in addition to the growth component.
The Chart
Now, part of the value is due to the substantial price declines in recent weeks. So, if you are going to get into CNH you better have a strong stomach. But the upside potential looks like it is worth the risk.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
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