CNH Industrial N.V. (CNH) Q3 2026 earnings review
CNH sells control of construction, while tariff refunds lift profit
CNH Industrial, the maker of Case IH and New Holland tractors, doubled its quarterly profit rate with help from US tariff refunds while agreeing to sell control of its construction unit. Industrial sales held nearly steady at $3.7 billion, and chief executive Gerrit Marx raised the full-year profit and cash flow outlook. However, a $156 million tax write-down on Brazilian farm loans cut reported net income in half, and by our math the third-quarter industrial operating margin excluding one-offs was 3.6% without net tariff refunds rather than 5.5%.
| Industrial net sales | $3,684M -0.5% from a year ago (-1% at constant currency) |
|---|---|
| Profit per share, excluding one-offs | $0.16 $0.08 a year ago (aided by $71M pre-tax net tariff refunds) |
| Construction joint venture | $700M cash selling 70% to Kobelco at a $1B valuation |
| Full-year profit per share outlook | Raised $0.025 middle of the range: $0.46 (-16% from 2025) |
⚖️ Verdict: 🟢 Bullish
The story got better because the agreement to sell 70% of Construction to Kobelco for $700 million solves a long-running margin drag and brings cash to cut debt. Early North American orders for 2027 farm machines also turned slightly positive after an 11% cut in third-quarter factory hours trimmed dealer inventory. The bad news: the Brazilian tax charge and a 4.1% overdue-loan rate show South American farmer stress is still worsening.
The question now is whether CNH can deliver the steep fourth-quarter step-up in farm profit and cash flow that its full-year plan requires without tariff refunds helping. Either lower base tariff rates and model-year 2027 pricing lift Agriculture profit as planned, or weak South American demand and $40 million of net fourth-quarter refund spending keep margins down. Fourth-quarter results on February 16, 2027 will settle it.
🐂 Bull Case
Kobelco Will Buy Control of Construction for $700 Million
CNH's smaller Construction Equipment division has struggled with thin profit margins and heavy tariff costs, and management has spent a year searching for a partner. Today the farm and construction machinery maker agreed to put the unit into a joint venture with Japan's Kobelco Construction Machinery. Chief executive Gerrit Marx said the deal "positions CNH as the largest pure-play agriculture machinery OEM".
- Valuation: $1 billion enterprise value for CNH's construction business
- Cash to CNH: about $700 million before tax and working-capital adjustments for a 70% stake
- Retained share: CNH keeps 30% ownership, with a three-year lockup for both partners
- Closing target: by the end of 2027, pending regulatory approvals
The agreement resolves a standing concern over how CNH would fix a sub-scale business whose operating margin excluding one-offs sits near 2% this year. Management will use the cash proceeds to pay down debt, and CNH's farm dealers will still sell the venture's machines. Because Construction lowers the group's profit rate, handing control to Kobelco will lift CNH's overall margin once the deal closes.
What to watch: the net cash proceeds after tax and working-capital adjustments as the late-2027 closing approaches. A clean close near $700 million would cover more than a quarter of the manufacturing arm's current $2.54 billion net debt.
Tariff Refunds Lifted Q3 Profit and Funded Dealer Discounts
CNH is collecting refunds on US tariffs previously paid under the International Emergency Economic Powers Act (IEEPA), a trade law. In the third quarter, the equipment maker booked $109 million of pre-tax refunds in its cost of making products, which fell 2.5 percentage points of industrial sales from a year ago. Research and development spending also dropped 1.5 percentage points because a year-ago $49 million project write-off did not repeat.
Marx said CNH put about 35% of the quarter's refunds into "selective time-limited one-time efforts to clear aged inventory and accelerate our transformation". Even after spending $33 million on dealer sales incentives and $5 million on engineering, net refunds added $32 million to Agriculture profit and $39 million to Construction profit. By our math, without those net refunds, industrial operating profit excluding one-offs was $131 million (a 3.6% margin) rather than the reported $202 million (5.5%).
What to watch: fourth-quarter tariff refund spending in the full-year report on February 16, 2027. CNH plans to spend $47 million on inventory clearance and engineering against only $7 million of new refunds in the fourth quarter, creating a $40 million profit drag.
North America Orders Turn Up as Factory Cuts Clear Lots
To work down extra machines sitting on dealer lots during the farm downturn, CNH has been building fewer tractors and combines than farmers buy. In the third quarter, the company cut Agriculture factory production hours by 11% from a year ago, which helped independent dealers trim their inventory by about $100 million. It also signed a partnership with seeding specialist Bourgault to add air drills and carts connected to FieldOps, CNH's farm software.
Marx said "improving cycle indicators in North America reinforce our confidence in the path ahead". The presentation notes that North American order intake for model-year 2027 machines is modestly higher than for model-year 2026, and factory build slots are full for the fourth quarter and half full for the first quarter. That supports management's argument that simply raising factory output back to match retail demand can lift 2027 volumes.
What to watch: the full-year dealer inventory reduction reported in February. Management previously targeted $400 million to $500 million of cuts for 2026, and with only $100 million achieved through September, fourth-quarter shipments must stay tight.
🐻 Bear Case
A $156 Million Tax Charge Shows Deepening Stress in Brazil
CNH's financing arm lends money to farmers and dealers to buy equipment, and weak crop prices in Brazil have hurt repayments all year. While CNH said in its outlook that the farm industry "approaches the end of this cyclical trough", its third-quarter accounts showed severe strain in South America. The company booked a $156 million non-cash tax charge against tax credits in its Brazilian lending unit, pushing Financial Services to a $77 million GAAP net loss.
- South America industry demand: tractor sales down 22% and combines down 19% from a year ago
- Overdue loans: 4.1% of the loan book was more than 30 days past due, up from 3.5% a year ago
- Construction sales: up 5.1% to $777 million, below the low-to-mid-teens growth discussed on last quarter's call as South America fell
Companies record a tax valuation allowance when recent losses make it unlikely they will earn enough taxable profit to use their tax credits. That accounting step, alongside overdue loans rising "due to economic factors impacting farmers, specifically in South America", shows Brazil is still deteriorating rather than healing.
What to watch: the 30-day delinquency rate in the fourth-quarter report. A reading that stays above last year's 3.1% year-end level would show that South American farmer defaults are still climbing into 2027.
Fourth-Quarter Cash Flow and Farm Profit Still Face a Steep Climb
CNH's full-year plan relies heavily on the final three months of the year for both cash generation and farm profit. Through the first nine months of 2026, the manufacturing business used $449 million of free cash flow because inventories on CNH's own balance sheet rose $483 million since December. Yet management raised its full-year industrial free cash flow outlook to a range of $300 million to $450 million.
By our math, hitting the middle of that outlook requires $824 million of free cash flow in the fourth quarter, slightly above the $817 million generated in last year's fourth quarter when profit was higher. Similarly, the Agriculture margin outlook implies about $280 million of fourth-quarter operating profit excluding one-offs, up 20% from a year ago, even as net tariff refunds swing to a $30 million drag.
What to watch: fourth-quarter industrial free cash flow and balance-sheet inventory in February. Falling short of the $300 million cash floor would mean CNH could not clear its factory inventory without deeper price discounts.
Risks this quarter didn't answer
Three standing concerns from prior quarters received no new figures in the third-quarter earnings release or presentation.
- New trade barriers: the release shows base tariffs cutting margins by 1.85 percentage points in Agriculture and 4.70 percentage points in Construction, but gives no update on potential Section 301 duties or North American trade-pact changes; the 2027 outlook in February will test this.
- Refinanced Brazilian loans: the release does not update the $558 million of modified farm loans disclosed last quarter; the quarterly Form 10-Q filing's footnote on financing receivables will show how many defaulted.
- Credit ratings and borrowing costs: Industrial net debt rose to $2.54 billion from $2.03 billion at year-end while CNH bought back $25 million of shares in the quarter; the Form 10-Q liquidity section will show any funding impact from earlier rating actions.
💲 Other KPIs
Shrinking slightly from a year ago and from last quarter. The managed portfolio — total retail and dealer loans overseen by CNH's lending arm, including joint ventures — fell 2.5% from $28.5 billion a year ago and slipped $200 million from June as new retail loan originations dropped 6.5% to $2.48 billion.
Rising since the start of the year as working capital absorbed cash. Debt in the manufacturing business, after subtracting cash and intercompany receivables, climbed $518 million from $2,025 million in December 2025 and ticked up $23 million from June, before fourth-quarter inventory sales bring cash back in.
Edging down 1.1% from 1,253 million a year ago. The equipment maker spent $25 million buying back shares in the third quarter by our math ($87 million over the first nine months), continuing modest repurchases after cutting its annual dividend per share to $0.10 from $0.25 earlier this year.
🔮 Guidance
Raised. The middle of the range moved up $0.025 to $0.46, which still represents a 16% drop from $0.55 in 2025. By our math, that leaves $0.16 for the fourth quarter, down 16% from $0.19 a year ago. It is the second raise this year after holding at $0.40 in the first quarter (+$0.035 in Q2, +$0.025 in Q3), driven by net tariff refunds.
Raised. Management lifted the middle of the cash flow plan by $75 million to $375 million, compared with $513 million generated in 2025. By our math, after using $449 million of cash in the first nine months, CNH must generate $824 million in the fourth quarter. It is the second raise this year: $0 in Q1, +$50 million in Q2, and +$75 million in Q3.
Raised. The presentation moved the manufacturing sales outlook to the top of the prior range at about 2% growth, up from $15.35 billion in 2025. By our math, with nine-month sales up 0.9%, the plan points to 4.6% growth in the fourth quarter. The midpoint has risen three times since the initial -2% forecast: +0.75 points, +2.25 points, and +1.0 point.
Raised. CNH lifted the bottom of the range by 0.2 percentage points, putting the middle at 3.6% against 4.3% in 2025. By our math, after a 2.9% margin over the first nine months, the outlook requires a 5.1% margin in the fourth quarter (6.0% before net tariff refund spending). Midpoint moves across four quarters: 0 points, +0.5 points, and +0.1 points.
Unchanged. The farm equipment division still plans for full-year sales to match last year's $12.39 billion, which means underlying volume falls about 2% once a 2% currency tailwind is stripped out. By our math, after nine-month sales of $8.78 billion, fourth-quarter sales will be roughly flat (+0.3%) against $3.60 billion a year ago.
Unchanged at the middle of the range. CNH narrowed the band around a 5.25% midpoint, down from 6.2% in 2025, as $5 million of full-year net tariff refunds barely alters the total. By our math, with nine-month profit at $370 million (4.2%), the fourth quarter needs $280 million of profit (a 7.8% margin, or 8.6% before net refund spending).
Raised. Management lifted the bottom of the range by 3 percentage points, moving the middle to 9% growth despite a smaller 1% currency tailwind. By our math, after 5.4% growth over the first nine months, the full-year target points to an 18% jump in the fourth quarter against $853 million a year ago. Midpoint moves: 0 points, +7.5 points, and +1.5 points.
Raised. The bottom of the range rose 0.2 percentage points for a 2.15% midpoint, aided by $30 million of full-year net tariff refunds. By our math, after a 2.3% margin in the first nine months, fourth-quarter margin drops back to 1.7% ( about $17 million of profit) because CNH will spend $10 million more on dealer programs than it receives in Q4 refunds.
❓ Key Questions
Can dealers still cut $400 million of inventory this year?
Management previously targeted $400 million to $500 million of Agriculture dealer inventory reductions in 2026. The presentation shows only $100 million of reductions through September, raising the question of how much can be cleared in the fourth quarter without deeper discounting.
Is the $600–$650 million industrial capital spending plan intact?
CNH spent $333 million on industrial property, plant, equipment and intangibles over the first nine months, only $12 million above last year. Management has not updated its initial $600 million to $650 million full-year capital spending target since the fourth quarter of 2025.
How are the refinanced Brazilian farm loans performing?
The third-quarter release booked a $156 million tax charge in Brazil and showed 30-day delinquencies at 4.1%, up from 3.5% a year ago. Investors need to know what share of the $558 million in previously refinanced Brazilian receivables has re-defaulted.
What tax leakage applies to the $700 million Kobelco cash?
CNH expects $700 million in gross cash for selling 70% of Construction to Kobelco, and plans to use the proceeds net of tax and working-capital adjustments to pay down debt. Management has not disclosed the expected tax bill or how much debt will transfer.