Baird upgrades CNH Industrial stock rating on margin recovery outlook

Baird upgraded CNH Industrial's stock rating to Outperform from Neutral on Monday, raising its price target to $15.00 from $11.00. The current stock price stands at $11.68, marking a nearly 28% increase year-to-date. However, InvestingPro data suggests the shares might be overvalued compared to their Fair Value estimate. CNH has faced significant revenue and margin compression, with agricultural equipment EBIT margin projected to be 4.5-5.5% for fiscal year 2026, down from a mid-cycle target of 12.5% and a 2030 target of 16.0-17.0%.

Margin performance has been affected by tariff cost drag, expected to ease into 2027, and mix and volume shortfalls. Baird believes volume improvement, particularly in North America where margins are better, will provide material earnings and margin upside. The firm anticipates earnings power to reach $0.90 in 2027 and surpass $1.50 in 2028, attributing this to operational and quality improvements becoming visible as production levels and cost absorption normalize.

While Baird remains optimistic, 9 analysts have lowered their earnings forecasts for the upcoming period, indicating ongoing uncertainty. CNH Industrial reported better-than-expected Q2 results for 2026, with adjusted earnings of $0.13 per share on $4.8 billion in sales, surpassing analysts' expectations of $0.10 per share on $4.76 billion in revenue.

This improvement was attributed to better margins and cash flow, along with revised guidance. Bernstein SocGen Group maintained a Market Perform rating on the stock, citing CNH's moderate Q2 beat and revised guidance driven by improving tariffs and cost-saving efforts. Wolfe Research noted a flat industry outlook for 2027 but expects a 4% sales benefit as underproduction normalizes.

DA Davidson kept a Neutral rating on CNH Industrial, with a $12.00 price target, after a call with management.