Analyst Note| Dawit Woldemariam |
After taking a fresh look at our thesis on CNH Industrial, we’ve increased our fair value estimate to $12.90 from $10.30, reflecting our more optimistic agriculture demand outlook. Crop prices have risen significantly, nearing highs seen at the beginning of the last decade, when a drought in the U.S. constrained global supplies. Today, crop prices are higher due to strong demand from China, in addition to tight capacity. We believe this will cause demand for agriculture equipment to increase in the near term, benefitting CNH. When crop prices rise, profitability for farmers improves, giving them the ability to refresh their machine fleet.