CNH Global N.V. (CNH) beat estimates and raised guidance in its last quarterly report. Yet shares have continued to sell off.
As the appetite for risk increases, bargain hunters should flock to the deeply discounted growth story. CNH is a Zacks #1 Rank (Strong Buy) with an impressive amount of upside potential.
Company Description
CNH Global N.V. makes agricultural and construction equipment worldwide. The company had 3 segments; Construction Equipment, Agricultural Equipment, and Financial Services.
Excellent Growth
On Jul 25 CNH Global reported an impressive 24% increase for its top line, to $4.9 billion. All 3 segments posted 22% growth or more. The Ag segment is the largest by far and was up 22%, to $3.9 billion.
Gross profit was up 32%, to $850 million which was helped out by a 160 bps increase in the gross margin. Earnings per share came in at $1.33, topping the Zacks Consensus Estimates by 34 cents. CNH Global has topped expectations in each of the past 7 quarters.
Raising Guidance
In the same announcement, CNH Global said it sees solid demand moving forward and raised its outlook. Analysts quickly did the same. The full-year 2011 Zacks Consensus Estimate is up 44 cents, to $3.38 in the past 3 months.
Next year’s EPS forecasts are averaging $3.84, a 23 cent jump. Last year the company brought in $2.08 per share, putting projected growth rates at 63% and 13%, respectively.
And a Value?!
Shares have been battered by economic concerns, combine that with estimates moving higher and you have some enticing valuations. The forward P/E is just under 10 times right now.
Factor in a 12.5% long-term growth rate and you have a PEG ratio of just 0.8. Shares are trading at 0.5 times sales and right at book value.
The Chart
I liked shares of CNH back in June and with shares moving even lower while estimates kept improving, I like them even more. Take a look at the divergence between the EPS estimates and the price. Over time that should correct and given the recent guidance, it is likely to be an increase in price rather than a decrease in estimates.
Read the June 22nd Feature Here
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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CNH GLOBAL NV (CNH): Free Stock Analysis Report
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