10 Best Heavy Equipment and Industrial Machinery Stocks to Buy

7) CNH Industrial N.V. (NYSE:CNH)

Number of Hedge Fund Holders: 24

CNH Industrial N.V. (NYSE:CNH) is a global leader in the industrial sector specializing in machinery and construction equipment.

The agricultural cycle that CNH Industrial N.V. (NYSE:CNH) is entering provides a strong growth potential. Agricultural cycles tend to bring higher demand for farming equipment and machinery, which aligns well with the company’s product portfolio. This cyclical upturn is expected to drive higher sales volumes and potentially improve pricing power for its agricultural products.

As per analysts, CNH Industrial N.V. (NYSE:CNH) is expected to benefit from higher-than-previous-cycle incremental margins and earnings. Therefore, the company is well-positioned to capitalize on the agricultural cycle’s momentum. The potential for expanded margins is expected to result in improved profitability and cash flow generation, offering resources for further investment in product development or market expansion.

Also, billionaire investor David Einhorn believes that CNH Industrial N.V. (NYSE:CNH) can increase its earnings to $2 per share or more during the next upcycle. This is expected to be fueled by higher crop prices. When crop prices rise, the farmers earn more revenue, improving their purchasing power. This often leads to increased investment in capital equipment, benefiting CNH Industrial N.V. (NYSE:CNH). Apart from this, a strong agricultural market will provide flexibility to the company to raise equipment prices, driving revenues.

Ariel Investments, an investment management company, released its Q4 2023 investor letter. Here is what the fund said:

“We found an attractive entry point for London based, agriculture machinery manufacturer, CNH Industrial N.V. (NYSE:CNHI), as shares are currently pricing in multi-year declines similar to the slope of the last agricultural downcycle (2014- 2016). Although farm incomes have begun to moderate and will likely translate to lower machinery purchasing in 2024, our analysis of U.S. farm fundamentals suggests the severity and longevity of the next downcycle will likely be shallower and shorter in duration. Additionally, CNHI remains on track to deliver on previously articulated operational efficiency and cost savings targets, which should drive margin improvement and profitability growth over the near to medium term. Looking ahead, we believe the industry will benefit from precision agriculture.”