CNH (CNH) Bearish Setup: Time to Consider Puts?

CNH is a global equipment company focused on designing, producing, and selling agricultural and construction equipment. In Agriculture, key brands include 'Case IH', specializing in machinery and precision farming solutions; 'New Holland', offering a broad range of equipment for specialty applications and methane power solutions; and 'STEYR', a regional brand focused on tractors. The 'Raven' brand focuses on disruptive agricultural technologies. In Construction, the company primarily utilizes the 'CASE Construction Equipment' and 'New Holland Construction' brands, offering a full line of equipment. Target markets for Agriculture include row crop farmers and dairy/livestock farmers. Construction targets contractors, residential builders, and rental companies. CNH differentiates its products based on product performance, innovation, quality, distribution, customer service, and price. CNH's Financial Services segment supports these operations by providing financing to end-use customers and dealers.

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CNH's technical outlook is decidedly bearish. The stock price has experienced a significant downtrend over the past 90 days, falling from highs around $13.70 in early July to its current price of $10.295. The price is trading well below its 50-day SMA of $10.91 and its 200-day SMA of $12.13, confirming the downtrend. Momentum indicators also signal weakness. The RSI is at 41.52, indicating oversold conditions, but not at a level that typically signals an imminent reversal. The MACD is negative (-0.11) and trending slightly upward, but still below its signal line, indicating continued bearish momentum. The recent price action shows a failure to sustain any meaningful rallies. The ADX is at 28.64, indicating a strong trend is in place. The STOCHk is at 41.24, also indicating bearishness. Given these factors, further downside is likely in the coming 1-3 months, with a potential test of the 52-week low of $9.87.

CNH Industrial's MD&A reveals a challenging operational landscape. `Net sales` for the three months ended June 30, 2025, decreased by 16.3% to $4,021 million compared to $4,803 million in the same period of 2024, attributed to 'lower shipment volumes on decreased industry demand and continued dealer destocking'. The `Gross Profit` margin, calculated from the provided data, contracted as cost of goods sold as a percentage of net sales increased to 79.4% from 77.1% in the comparable period. For the six months ended June 30, 2025, `Net cash provided by operating activities` was $934 million, a significant swing from the $515 million net cash *used* in operating activities during the same period in 2024. However, this improvement stems largely from changes in working capital, and overall net income decreased significantly. The company acknowledges 'volatile disruptions' in the global economy due to 'geopolitical events, shifts in trade and economic policies', and other factors that are 'expected to persist through the rest of 2025', impacting customer profitability and demand. This paints a mildly bearish picture, driven by weakened sales and profitability, despite the positive operating cash flow for the six-month period.

The CNH Industrial Q2 2025 earnings call presents a mixed outlook. Management acknowledges 'market conditions in the quarter remained soft,' with consolidated revenues down 14% to $4.7 billion and Ag segment sales decreasing by 17%. However, they reaffirm their full-year net sales and EBIT margin guidance for both Agriculture and Construction segments, signaling confidence in their ability to navigate the headwinds. Industrial production hours were down 12% year-over-year, reflecting a conscious decision to underproduce and reduce channel inventories. While Ag North America experienced a significant 36% sales decline, EMEA saw increased dealer orders, especially in Eastern Europe. The company is actively managing tariff exposures through strategic sourcing, pricing actions, and operational efficiencies, with Jim Nickolas stating that the 'overall assumed tariff impact is roughly in line with the midpoint of our prior guidance.' Furthermore, the company highlights its focus on operational excellence and technological advancements, including a new collaboration agreement with Starlink to provide connectivity for farmers. While challenges persist, the reaffirmation of guidance and strategic initiatives suggest a moderately bullish outlook.

CNH's financial performance presents a mixed but concerning picture. Revenue has fluctuated, starting at $4.819B in Q1 2024 and reaching $4.711B in Q2 2025, indicating inconsistent top-line growth. The `grossProfitRatio` has shown volatility, with a high of 0.3378 in Q1 2024, but a concerning negative value of -0.2672 in the latest quarter, Q2 2025, signaling significant cost pressures or pricing issues. `OperatingCashFlow` has also been highly variable, with $772M in the most recent quarter, Q2 2025, but a concerning -$894M in Q1 2024. Total debt has decreased from $28.098B in Q1 2024 to $0 in Q2 2025, which is a significant positive development. However, the negative `grossProfitRatio` in the most recent quarter raises serious concerns about the company's ability to maintain profitability. While the debt reduction is a positive sign, the volatility in revenue and the negative gross profit margin suggest potential challenges in the near term.

The company presents a moderately bullish investment profile based on its key metrics and financial ratios. Revenue has shown positive growth, indicating a healthy demand for its products or services. The gross margin has remained relatively stable, suggesting efficient cost management. The Return on Equity (ROE) indicates a solid return for shareholders. The Price-to-Earnings (P/E) ratio suggests the company is appropriately valued by the market. The debt-to-equity ratio has seen a decrease, showcasing the company's improved financial leverage. The current ratio signifies the company's strong ability to meet its short-term obligations. Overall, the company demonstrates a stable and growing business model with a healthy balance sheet, making it a moderately attractive investment for the next 6-12 months.