CNH Industrial (NYSE:CNH) reported second-quarter results that management said were generally in line with expectations as the agricultural equipment market remained pressured by weak farm profitability and cautious customer spending on large capital purchases.
Chief Executive Officer Gerrit Marx said the company is managing through a difficult point in the agriculture cycle while using the downturn to improve product quality, sourcing and manufacturing efficiency. He said CNH is also investing in connected and artificial intelligence-enabled technology across its equipment base and dealer network.
Agriculture margins decline amid tariffs and mix
Agriculture segment sales were approximately $3.3 billion, up 1% from the prior-year period, including a 2% favorable currency translation effect. Sales increased 10% in North America and 1% in Europe, the Middle East and Africa, while South American sales fell 27%.
Agriculture gross margin declined to 19.7% from 21.8% a year earlier. Chief Financial Officer Jim Nickolas attributed the decline partly to unfavorable product mix, including weaker sales of large tractors relative to smaller tractors in North America and lower combine sales relative to tractors in South America.
Agriculture adjusted EBIT margin fell to 5.2% from 8.1% in the 2025 second quarter. Nickolas said unfavorable mix and tariff costs outweighed the benefits of pricing and cost-saving measures. He added that price-cost performance was positive in the quarter and is expected to remain positive for the full year.
Dealer inventories were slightly lower sequentially, with reductions in North and South America partly offset by higher inventories in EMEA, where retail demand was weaker than expected. CNH is targeting an additional $400 million to $500 million reduction in dealer inventory by year-end, with the reduction weighted toward the fourth quarter.
Management lowered its industry outlook for certain agriculture categories, citing reduced expectations for small tractors in North America and combines in EMEA and South America. However, with order slots nearly full for the year, CNH raised its agriculture sales outlook to approximately flat year over year, at the high end of its prior guidance range. It narrowed agriculture adjusted EBIT margin guidance to 5% to 5.5%.
Construction sales rise, though tariffs weigh on profitability
Construction segment net sales rose 12% year over year to $866 million, led by North American volume growth. The performance included shipments delayed from the first quarter because of a supplier quality issue, Nickolas said. EMEA posted modest volume growth supported by currency, while South America remained challenging.
Construction gross margin declined to 11.9% from 15.7% a year earlier, primarily due to tariffs. Adjusted EBIT margin was 1.7%, compared with 4.5% in the prior-year quarter.
CNH raised its full-year construction sales outlook to growth of 5% to 10%, including roughly 2% of favorable currency and about 1% of pricing. Construction EBIT margin is expected to be between 1.8% and 2.3%.
Management said it sees healthy construction markets supported by infrastructure development, data centers and power-generation activity. The company also continues discussions with potential construction partners to improve economies of scale, geographic reach and competitiveness, particularly in heavy excavators, Marx said.
Tariff relief and capital allocation
CNH said revised Section 232 tariff rules reduced tariffs on certain equipment categories to 15% from 25%. The company now expects tariffs to reduce 2026 agriculture margins by about 170 basis points and construction margins by about 470 basis points. Construction has greater exposure to imported finished equipment and North American sales, Nickolas said.
The company said the lower tariff rates are beneficial but will not fully flow to profitability because CNH has not passed all tariff costs through to customers and because transportation costs have increased amid shipping-lane disruptions.
CNH received $5 million in tariff refunds during the second quarter and is filing approximately $135 million in Phase 2 claims, with a further estimated $15 million expected to be filed in a future Phase 3 process. Those potential refunds were not included in guidance because the timing of receipt is uncertain. Management said it intends to reinvest a meaningful portion of any refunds in areas including precision technology, manufacturing upgrades and inventory-reduction incentives.
During the quarter, CNH paid $126 million in annual dividends and repurchased $36 million of stock at an average price of approximately $10.31 per share.
Outlook points to a flat 2027 agriculture market
Marx said CNH’s baseline outlook calls for an “L-shaped” recovery in agriculture, with 2027 retail demand broadly flat and replacement demand carrying much of the market. He said dealer inventories, used equipment inventories, fleet age and the spread between new and used equipment values are becoming more constructive.
However, commodity prices remain at or below break-even levels for many growers, while fuel, fertilizer and transportation costs remain elevated. Those conditions continue to limit farm profitability and farmer confidence, according to Marx.
CNH expects production to align more closely with retail demand in 2027. Marx said the company is underproducing relative to 2026 demand by about 4%, which should create a production tailwind next year if retail markets remain flat. He and Nickolas said cost reductions, sourcing initiatives, quality improvements and pricing discipline could support earnings even in a flat demand environment.
The company forecast 2026 industrial net sales ranging from flat to up 2%, industrial adjusted EBIT margin of 3.2% to 3.8%, industrial free cash flow of $200 million to $400 million, and adjusted earnings per share of $0.41 to $0.46.
About CNH Industrial (NYSE:CNH)
CNH Industrial N.V. is a global capital goods company specializing in the design, production and sale of agricultural and construction equipment, commercial vehicles and powertrain solutions. The firm operates through five core brands—Case IH and New Holland for agricultural machinery, Case and New Holland for construction equipment, Iveco for light, medium and heavy commercial vehicles, and FPT Industrial for engines and drivetrain components. Established in 2013 through the combination of Fiat Industrial and CNH Global, the company draws on a rich heritage of innovation dating back to pioneering landmarks in farm and construction machinery from the 19th century.
The company’s product portfolio encompasses tractors, combines, balers, excavators, backhoe loaders, trucks, vans and bespoke engines for marine, automotive and industrial markets.
