CNH (CNH) Q4 2025 Earnings Call Transcript

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DATE

Tuesday, Feb. 17, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Gerrit Marx
• Chief Financial Officer — James A. Nickolas

TAKEAWAYS

• Consolidated Revenue -- $5.2 billion in Q4, up 6% year over year, attributed primarily to favorable pricing and higher production versus a weak 2024 base.
• Agriculture Segment Sales -- $3.6 billion in Q4, up 5% year over year, with EMEA up 33%, North America down 10%, and growth mainly driven by pricing and currency translation.
• Construction Segment Sales -- $853 million in Q4, up 19% year over year, reflecting improved performance in the Americas.
• Industrial Adjusted EBIT -- $234 million in Q4, up 21% year over year as positive price realization, higher production, and cost saving actions overcame tariff and geographic mix headwinds.
• Adjusted Net Income -- $246 million in Q4 with adjusted diluted EPS of $0.19, up from $0.15 the prior year quarter.
• Cost Savings Achieved -- $230 million extracted from the agriculture segment in 2025, positioning CNH to reach its $550 million cumulative cost savings target by 2030.
• Agriculture Dealer Inventory Reduction -- $800 million full-year reduction, nearing the $1 billion target but falling slightly short due to higher Q4 shipments in response to improved European demand.
• Industrial Free Cash Flow -- $817 million in Q4, broadly similar to the previous year despite less favorable net working capital changes.
• Agriculture Segment Adjusted EBIT Margin -- 6.5% in Q4, down from 7.2% prior year, impacted by tariffs, geographic mix, and higher SG&A, partly mitigated by pricing and lower R&D.
• Construction Q4 Gross Margin -- 11.5%, representing a 340 basis point year-over-year decline primarily from $35 million in tariff impacts.
• Construction Adjusted EBIT Margin -- 0.6% in Q4, impacted by increased tariffs and SG&A inflation.
• Financial Services Segment Net Income -- $109 million in Q4, up 18% year over year as interest margin gains outweighed higher risk costs in Brazil and lower volumes elsewhere.
• Retail Originations -- $2.8 billion in Q3, with the managed portfolio ending Q4 at $28.6 billion.
• Gross Tariff Cost Impact -- 2025 saw a 110 basis point EBIT margin impact in agriculture and a 225 basis point impact in construction, with both expected to increase further in 2026.
• Dealer Network Strategy -- Progress made in consolidating the dealer base, with a goal to cut first-level ag dealer owners by one-third by 2030, moving from 2,500 owners across 6,000 locations in 2024.
• Precision Technology Target -- Aim to double precision tech components within axles to 10% by 2030, supported by North America’s anticipated market rebound.
• Sustainability Recognition -- CNH ranked number one on S&P’s global 2025 corporate sustainability assessment and received an A for climate and A- for water in CDP’s 2025 scoring.
• 2026 Guidance: Industrial Net Sales -- Projected to be flat to down 4% year over year.
• 2026 Guidance: Industrial Adjusted EBIT Margin -- Forecasted at 2.5%-3.5%, reflecting higher tariff impacts and unfavorable regional mix.
• 2026 Guidance: Free Cash Flow -- Industrial free cash flow expected between $1.5 billion and $3.5 billion.
• 2026 Guidance: Adjusted EPS -- Expected in the range of $0.35-$0.45 assuming average shares outstanding of 1.29 billion.
• 2026 Guidance: Agriculture Segment -- Net sales projected flat to down 5%, EBIT margins guided to 4.5%-5.5%, with tariffs to negatively impact margins by up to 220 basis points and regional mix a further drag of up to 50 basis points.
• 2026 Guidance: Construction Segment -- Net sales and production expected flat, EBIT margin between 1%-2% with tariffs forecasted to have a 500 basis point margin impact.
• 1Q 2026 Outlook -- Company expects breakeven EBIT in both total and agriculture segments, with construction EBIT likely negative and free cash flow outflow larger than Q1 2025 due to low production and inventory buildup.
• Q2 2026 Sequential Trends -- Agriculture segment expected to show sequential margin and profit improvement over Q1, but remain below Q2 2025 levels.
• 2025 Shareholder Returns -- $432 million returned, comprised of $332 million dividends and $100 million in share repurchases; Q4 buybacks totaled $45 million at an average price of $10.02 per share.
• Pricing Power by Region -- North America and EMEA expected to be the leaders in price realization for 2026.
• CapEx Outlook -- Planned increase to $600 million to $650 million in 2026, primarily targeting manufacturing upgrades, dealer enhancements, and tooling for sourcing initiatives.
• SG&A Outlook -- SG&A expected to be a 40 basis point headwind in 2026 reflecting normalization of variable compensation.
• Production Slot Updates -- Q1 production slots are full; ag segment is three-quarters full and construction half full for Q2.
• Innovation Initiatives -- Robust pipeline of new tractor, harvester, crop production, and precision tech launches scheduled through 2027, with AI Tech Assist tool already deployed to over 1,500 users and major new product categories such as a cotton harvester under development.

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RISKS

• Gerrit Marx stated, "commodity prices remain low, and as that is the single largest contributor to farm income, it is hard for farmers to operate their farms, let alone purchase equipment," indicating sustained demand pressure due to weak farmer economics.
• James A. Nickolas forecasted, "The low production levels, the unfavorable geographic mix, and the full impact of the tariffs will likely result in a breakeven Q1, plus or minus, for both the agriculture segment EBIT and company-wide earnings per share." and projected construction EBIT will likely be negative in the quarter.
• Tariff headwinds are expected to intensify, with gross tariff cost impact on agriculture EBIT margin rising from 110 basis points in 2025 to about 210-220 basis points in 2026, and construction facing a 500 basis point margin impact.
• Regional mix shifts, notably greater EMEA exposure at the expense of North America, are projected to create a further margin drag of up to 50 basis points in 2026.

SUMMARY

CNH Industrial N.V. (NYSE:CNH) reported year-over-year growth in Q4 revenue and EBIT from a low comparison base, with results buoyed by EMEA and construction sales, but full-year 2025 revenues declined 9% due to ongoing sector weakness and unfavorable mix. Earnings guidance for 2026 reflects a forecasted trough year, with industrial net sales projected flat to down 4%, while management detailed a significant escalation in tariff-related margin headwinds and continuing regional mix challenges. The company indicated minimal inventory destocking opportunities remain and expects Q1 2026 EBIT to be at breakeven or below, with free cash flow outflows larger than prior years due to lower EBIT and inventory build. Major cost and operational improvement initiatives have delivered $230 million in savings and are on track for 2030 targets, but the anticipated benefit for 2026 will be partially or fully offset by tariffs and adverse mix, restraining margin expansion.

• Gerrit Marx signaled ongoing dealer network consolidation efforts, with further multi-brand distribution transitions expected, particularly weighted toward earlier years of the plan’s timeline.
• Management described a robust innovation and product launch cycle, highlighting launches of mid-range tractors, combines, and precision farming technologies, as well as new categories such as a cotton harvester and compact tractors for global markets.
• Field inventory levels now closely align with demand following $800 million in destocking, positioning CNH for production normalized to retail demand in 2026 and potential revenue growth as production undercuts end in late 2026.
• CNH received the top industry ranking for sustainability on S&P’s global 2025 assessment and achieved top climate and water scores from CDP, advancing its ESG credentials among peers.
• James A. Nickolas explained that increased CapEx will primarily fund manufacturing enhancements and strategic sourcing, with additional capital devoted to dealer infrastructure and facility relocations, timed to precede anticipated market recovery.
• Farmer sentiment in North America remains subdued due to persistently low commodity prices, with sales closely tied to farmer cash flows; impending policy developments were noted as a possible future variable.

INDUSTRY GLOSSARY

• EMEA: Europe, Middle East, and Africa region, a key geographic segment referenced for sales and market trends.
• Dealer Destocking: The process of reducing dealership inventory levels, aligning company shipments more closely with retail demand.
• CR NAF Series: CNH’s award-winning combine harvester product line highlighted for segment leadership.
• GenAI: Generative Artificial Intelligence technology employed for accelerating product launch and innovation.
• FieldOps: CNH’s proprietary platform for AI-enabled precision agriculture solutions integrating machine connectivity and boundary management.
• SG&A: Selling, General, and Administrative expenses, referenced for margin and cost guidance.
• Precision Tech Components: Technology solutions, including guidance and steering, integrated into agricultural machinery for higher productivity and data analytics.
• Section 232 Tariffs: U.S. trade tariffs directly impacting CNH’s cost structure and segment profitability.
• Managed Portfolio: The aggregate principal balance of CNH’s finance arm outstanding with customers and dealers.

Full Conference Call Transcript

Gerrit Marx: Thank you, Jason, and welcome to everyone joining the call. We are calling today from our plant in Wichita, Kansas, where we build loaders for our construction business. There were bright spots for us to celebrate as the year ended, even though there are continuing challenges in the markets that we serve. We had a successful tech day presentation at the AgriTechnica show in November. If you have not seen it yet, we encourage you to watch the replay and learn about the advancements we have made, and will continue to make, in the pursuit of serving farmers on their soil. At AgriTechnica, we showed how CNH Industrial N.V. tech powers digital solutions for our world-class iron.

From factory-fit to retrofit aftermarket solutions, we have the technology to help farmers be more productive with their equipment. We also introduced a new lineup of mid-range tractors for the global market, which specifically addresses a particular need in Europe for large mid-range high-horsepower tractors. This new tailored offering of tractors helps us compete better and facilitates pull-through sales of combines, sprayers, and planters. We also showcased our leadership in combine harvesters with our award-winning CR NAF series machines. We have ramped up our efforts to strengthen and consolidate our dealer network with several flagship transactions already completed. This is a critical piece of our long-term strategy and we are very pleased with the initial reaction from our dealer partners.

We are proud of the progress we have made with our quality and operational excellence initiatives that we outlined at our Investor Day last year. We took out $230,000,000 of cost from the agriculture segment in 2025, which puts us on pace to achieve the $550,000,000 cumulative savings target by 2030. Those savings plus incremental actions that we will take will help us eventually offset the entire tariff cost impact incurred. We also continue to make progress on our near-term goals. Agriculture dealer inventories were down another $200,000,000 in the quarter, for a full-year reduction of about $800,000,000.

That is a little shy of the target that we had initially set at the 2025, but it is because we shipped out a bit more company inventory to the dealers than we had originally expected in Q4 on the back of the European market showing some green shoots. But commodity prices remain low, and as that is the single largest contributor to farm income, it is hard for farmers to operate their farms, let alone purchase equipment. The trade environment remains in flux, which makes it difficult for CNH Industrial N.V. farmers and builders to have a sense of certainty when making capital investments.

So we do our best and focus on the things that we have in our own control. So while market conditions were very dynamic, and are forecasted to remain so in 2026, the CNH Industrial N.V. team is focused on solutions today and in the future that delight our farmers and builders and that will deliver returns for our shareholders. With that, let us turn to the results. On a year-over-year basis, our Q4 results are very encouraging. We are, however, comparing to a very low 2024, when we had severely cut our production levels.

We will talk about our 2026 guidance in a moment, but I want to caution against using this Q4 improvement as a run rate into Q1. Fourth quarter consolidated revenues were $5,200,000,000, up 6% from 2024. Our ag segment sales were up 5% with EMEA up 33%, North America down 10%. Construction sales were up 19% on an easy comparison with 2024. Industrial adjusted EBIT was $234,000,000, up 21% year over year, mainly as a result of positive pricing, higher production, cost-saving actions, and lower corporate expenses, which together offset the tariffs and geographic mix headwind. Adjusted net income was $246,000,000, with adjusted EPS for the quarter at $0.19.

Looking at the full year, we faced another challenging period for the ag industry. 2025 consolidated revenues were down 9% year over year, while industrial sales decreased double digit. 2025 industrial adjusted EBIT margin was 4.3%, primarily driven by the higher tariff costs and unfavorable geographic mix, partly offset by pricing and cost mitigation actions. We remain confident that our North and South American markets will deliver growth in revenue and profit pools in the coming years as trade flows stabilize and farmers migrate to larger machines with connectivity solutions. We grew market share in large tractors and combine harvesters in North America during 2025.

As we move into 2026, EMEA is on a great path to further recover from its low margin levels through our transformation, cost efficiency programs, and market share gains in the midrange tractor segment. Sustainability has always been one of our main priorities because it is vital to all farmers. We discussed at the tech day, land is the most valuable asset for a farmer, and soil health is of prime importance. That is why we have always stressed sustainability in our operations and in our machines. For us, sustainability is not only about protecting the environment, it is also about ensuring the long-term profitability of our farmers, which is central to our conviction of what true sustainability means.

We are proud to have been ranked number one in our industry on S&P's global 2025 corporate sustainability assessment and to have received an A for climate and an A- for water in CDP's 2025 scores. These results recognize our leadership in environmental actions and disclosure across our products, operations, and supply chain. With that, I will turn the call over to Jim to take us through the details of our financials.

James A. Nickolas: Thank you, Gerrit. Fourth quarter industrial net sales were up 8% year over year to nearly $4,500,000,000, mainly driven by favorable price realization and positive foreign exchange impacts. Adjusted net income increased to $246,000,000 with adjusted diluted earnings per share at $0.19, up from $0.15 in Q4 2024. Even though we had low production levels in Q4 2025, they were higher than the very low levels in the same period of 2024. So the year-over-year increase in sales and income is mostly related to a relatively easy comparison.

Industrial free cash flow in the quarter was $817,000,000, essentially in line with Q4 of the previous year as the lower year-over-year change in net working capital was offset by better EBIT and cash taxes. Agriculture Q4 net sales were about $3,600,000,000, up 5% year over year, driven by favorable pricing and positive currency translation. On a regional basis, the year-over-year sales decrease in North and South America was more than offset by the EMEA increase, which was mostly in Central and Eastern Europe along with the Middle East. Positive pricing was the most pronounced in EMEA and North America.

Adjusted gross margin was 20%, down slightly from 20.6% in Q4 2024, affected by the tariff costs and unfavorable geographic mix, partially offset by purchasing efficiencies, lower warranty expenses, and a 15% increase in production hours. Agriculture adjusted EBIT margin was 6.5%, down from 7.2% in 2024, as positive pricing and lower R&D partially offset negative product and regional mix and higher SG&A related to variable compensation. On a full-year basis, gross tariff costs had a 110 basis point impact on EBIT margin and unfavorable geographic and product mix had a 90 basis point impact. Construction net sales in the quarter were up 19% year over year to $853,000,000, driven by better sales in North and South America.

Q4 gross margin was 11.5%, down 340 basis points year over year as tariffs weighed on the quarter's profitability. Favorable purchasing and manufacturing efficiencies were more than offset by $35,000,000 of tariff costs. Those are all netted together in the product cost category of the EBIT bridge. As was the case in agriculture, construction SG&A was unfavorable due to variable compensation and labor inflation. Q4 adjusted EBIT margin was 0.6%. On a full-year basis, gross tariff costs had a 225 basis point impact on EBIT margin. In financial services, segment net income in the quarter was $109,000,000.

The 18% year-over-year increase came from interest margin improvements across all regions, only partially offset by higher risk costs in Brazil, and lower volumes in North America and EMEA. Retail originations in the third quarter were $2,800,000,000, and the managed portfolio ended the quarter at $28,600,000,000. Credit collection rates have been relatively steady in most regions, despite the market downturn. Delinquency rates in Brazil have stabilized, albeit at elevated levels. Our capital allocation priorities remain the same: reinvesting in our business while maintaining a healthy balance sheet, and then returning cash to shareholders. During Q4, we repurchased $45,000,000 worth of CNH Industrial N.V. stock at an average price of $10.02 per share.

For the full year, we returned $432,000,000 through $332,000,000 in dividends and $100,000,000 in share repurchases. I will come back in a moment to discuss our 2026 guidance. But first, let us take a look at the progress on our long-term targets. Gerrit?

Gerrit Marx: Thank you, Jim. Our company strategy is centered around five key strategic pillars: expanding product leadership, advancing our iron and tech integration, driving commercial excellence, operational excellence, and quality as a mindset. These pillars keep our team focused and united in our shared purpose to feed and build the world we live in. Today, I would like to give you an update on our progress on each of these areas. Innovation is a constant at CNH Industrial N.V., and we have a robust pipeline of new product launches. We are using rising technologies such as GenAI to increase the velocity of our product introductions.

At our Investor Day, we outlined plans for more than new tractor launches, 10 in harvesting, 19 in crop production, and over 30 precision technology releases between now and 2027. You can see on the slide the progress we have already made in 2025, and we had about as many minor product launches as the major ones during the year. And the pipeline is full for 2026 and 2027, underscoring our commitment to continuous improvement and purposeful innovation. Expanding on this a little bit, I want to highlight just a few of the innovations that we introduced at AgriTechnica, some things in development and some already commercially available.

In addition to our green-on-brown and variable rate application technology, which are already available, we highlighted some of the progress that we have made on green-on-green spraying in conjunction with our partner One Smart Spray. The solution is targeted to launch in 2027 and will improve the farmer's profitability and sustainability. We also spent some time explaining how active and passive implement control can help correct the field conditions that would otherwise compromise tilling or planting. FieldOps has introduced new features such as AI-enabled field boundary management, and we are constantly adding new features to this tool. More to come in 2026, such as additional machinery support and further remote display abilities.

We partnered up to introduce the Fleet Pro line of aftermarket kits for the EMEA region at a very competitive price point in a commoditizing market. These guidance and steering kits provide a value offering for legacy products of all makes, while our state-of-the-art Raven technology will equip our recent and new machines in full connectivity with our FieldOps system. These and other innovations will help us achieve our goal to nearly double the amount of precision tech components within our axles to 10% by 2030. We are on track to achieve that with the eventual rebound of the North American market, which tends to favor a richer mix of precision tech components.

One of the key pillars of our long-term strategy is driving commercial excellence by working with and strengthening our distribution network. This is a long journey, and benefits are more back-end loaded in our plan. As disclosed in our last annual report, in 2024, we had about 2,500 ag dealer owners operating about 6,000 points of sale. Our goal is to reduce the number of first-level owners by about a third while maintaining very competitive point of sale and service coverage. Feedback from our forward-leaning and ambitious dealer partners, both large and small, has been enthusiastic.

Our progress on this front will create some noise in the channel as it should, but the expanded reach of the dealers can be leveraged for better investments in facilities and service technicians. We are also giving dealers access to new and better tools like the AI Tech Assist. That tool is getting rave reviews with over 1,500 users worldwide who have used it already over half a million times. Our 2030 target is to have around 60% of our access coming from dealers who sell both brands in their network, up from 30% in 2024; 2025 was already 35%. You can see examples of some notable transactions we have done on this front.

The message here is not Case IH is taking over New Holland or the other way around. The message is giving dealers access to all the great products that we have, regardless of their branding. We finally focus our collective and unrivaled attention on competing with companies with green-colored products. That was not always the case in the past. Our in-flight operational initiatives have runway to continue underlying margin expansion. Our strategic sourcing initiative uses data-driven insights and supplier partnerships to improve cost efficiency while maintaining quality and reliability, and it delivered $34,000,000 worth of savings in agriculture in 2025 alone. Our lean manufacturing projects boost productivity, reduce downtime, and streamline workflows.

We realized $45,000,000 savings at our plants in 2025 as a result of these efforts. Quality is one of our most important focus areas. Enhancing product reliability and refining manufacturing processes helped us realize over $150,000,000 quality cost savings in 2025. Now, admittedly, that excludes the warranty true-ups that we did in 2024. But beyond the cost improvements, we see our dealer and customer satisfaction survey results reflecting the improvements that we are making in this area. Our net promoter score went up 8 percentage points in 2025 versus 2024, which has ongoing benefits to our reputational value. Quality pays back in three ways: lower cost, better ability to price, and growing market share in a self-reinforcing virtuous circle.

All told, our cost savings initiatives already add up to $230,000,000 in 2025, making us well on the way to our $550,000,000 savings target. Again, the pace of the savings will moderate in 2026 because of the warranty one-timers, but you will see the cumulative savings grow over the next few years. Let us now put this in context of our margin goal. Our commitment is to raise agriculture EBIT margin to 16% to 17% by 2030 on an industry mid-cycle basis. That commitment was made prior to the expansion of Section 232 tariffs, but our intent is to offset those costs and still reach the EBIT margin target at mid-cycle volumes.

Netting the savings that we just discussed against investments that we are making as planned in R&D and in the network development, we improved the margin profile of our ag business by 85 basis points. In 2026, we will further improve the margin profile between 50 to 75 basis points, which is admittedly hard to see in the consolidated figures, as we are impacted by a temporary adverse regional and product mix in sales and margins, as Jim will explain in a moment. We are laser-focused on improving the underlying profitability and we did make sound progress in year one on our path to 2030. With that, Jim will now discuss our 2026 guidance.

James A. Nickolas: Thanks, Gerrit. Let us first look together at our CAGRs for industry outlook for 2026. Commodity prices remain low, below many farmers' breakeven point, and they want more confidence in their end markets before making equipment purchases over and above the replacement demand. North America lagged the other regions into the downturn, and so now it is the region expected to decrease the most in terms of large equipment industry retail demand. Conditions in South America remain weak, but we forecast a more flattish demand in EMEA with tractors slightly up year over year and combines slightly down.

In aggregate, we forecast global industry retail demand to be at around 80% of mid cycle, or down around 5% from 2025 levels. 2026 should represent the trough of the cycle. As Gerrit mentioned, we do expect the North America revenue and profit pool will grow significantly over the next five to ten years as demand grows for even larger machines and fully connected production systems. CNH Industrial N.V. is well positioned to capture a larger share of those pools on all the advancements that we have made in harvesters, tractors, and tech. We will still be underproducing to the retail demand in order to reach our dealer inventory targets, with overall production levels flattish year over year.

In addition to the industry demand stability in Europe, we are gaining strength in that market on the back of recent product launches, our focus on quality, and the network consolidation. Consequently, we are forecasting ag net sales to be flat to down 5% when compared to 2025, and that includes favorable currency translation of 2% and positive pricing of 1.5% to 2%. We continue to take advantage of these slow months of production to improve our industrial processes. Gerrit mentioned that our cost initiatives will improve ag margins by 50 to 75 basis points in 2026.

However, tariff headwind is expected to grow from 110 basis points in 2025 to about 210 to 220 in 2026, as we continue to work to fully offset tariff impacts through sourcing, production moves, and additional pricing. The mix shift between North America and EMEA has disrupted our usual decremental margins, and that had a drag on our 2025 EBIT margins by about 90 basis points. We estimate regional mix to have an additional drag of up to 50 basis points in 2026. When the North American market inevitably recovers, we will see our incremental margins revert back to the normal levels in the low thirties. With all that, we expect ag EBIT margins to be between 4.5% to 5.5%.

In construction, we forecast flattish demand in both light and heavy equipment, with the exception of South America, where we expect further demand pressures on heavy equipment. We expect strength in certain nonresidential construction markets to be offset by persistent weakness in residential construction. Construction production levels and net sales will be about flat year over year, including about 1% of favorable currency translation and 2% of pricing. EBIT margin is forecasted to be between 1% to 2%, mainly due to taking a full year of tariffs, which are now estimated to have a gross impact of around 500 basis points of margin.

Putting together all those elements, we forecast 2026 industrial net sales to be flat to down 4% year over year, and industrial adjusted EBIT margin between 2.5% to 3.5%. We plan R&D expenses to be about flat year over year while CapEx will be between $600,000,000 and $650,000,000. Industrial free cash flow is forecasted to be between $1,500,000,000 and $3,500,000,000. Our effective tax rate is expected to be in the usual long-term range of between 24% to 26%. Adjusted EPS is forecasted to be between $0.35 and $0.45, assuming an average share count of about 1,290,000,000 shares. To help with your modeling and to prevent any surprises, I will provide some additional considerations for our first quarter.

In the quarter, we will continue to produce at low levels in order to achieve our internal dealer destocking target. As a reminder, Q1 is historically the weakest quarter of the year in terms of sales and margins. On average, the sequential percentage drop in sales from Q4 to Q1 is in the low to mid-20s. For construction, the 2026 drop should be similar to past years. But in ag, you should expect sales to be down sequentially in the low thirties, as some of our Q4 2025 sales were effectively a pull-ahead of what we had originally expected to sell in Q1 2026.

We are continuing to advance our cost reduction initiatives, and while these actions will not fully offset Q1 headwinds, they are gaining traction and will deliver increasing benefits as the year progresses. The low production levels, the unfavorable geographic mix, and the full impact of the tariffs will likely result in a breakeven Q1, plus or minus, for both the agriculture segment EBIT and company-wide earnings per share. Construction EBIT will likely be negative in Q1 due to tariff headwinds. The agriculture segment's Q2 will be much better sequentially, albeit likely a bit lower versus Q2 2025.

When we get into the second half, we are forecasting overall profits and margins to be higher on a year-over-year basis despite the tariffs, exiting 2026 with a clearly positive trajectory. Free cash flow in the quarter will be an outflow as is typical due to the company inventory buildup at the beginning of the year as we prepare for the spring selling season. We expect this quarterly outflow to be larger than in Q1 2025, mainly driven by the lower EBIT generation. With that, I will turn it back to Gerrit for some closing remarks.

Gerrit Marx: Thank you, Jim. While we may have hoped for greater stability in the trade environment by this point, the reality is that we must remain agile in our approach. We carefully observe market conditions, we will be deliberate with our production and inventory planning. Production slots are full for Q1; for Q2 in ag, ag is three-quarters full and construction is half full. We are excited about the commercial launch of our new midrange tractors. And our internal organizational changes are helping us to improve the speed of our product launches by a great deal. That goes for both our IRID and our TECH, and you will see an increased frequency of our technology releases.

We are also making progress in our development of new product categories, such as our cotton harvester that is coming. We have made great strides already on our long-term targets for quality and for operational excellence, and we will continue to do so in 2026 with an incremental 50 to 75 basis points margin improvement. That will be offset by the incremental tariffs and regional mix. But we will continue to work with our dealer partners on finding the right network configuration in each of the markets that we serve. The right answer will vary by region and brand, but we will remain focused on what makes the most sense for servicing our customers.

Even in the face of the most significant downturn in our industry in decades, we are delivering better products with higher quality while improving our underlying margin profile. The markets are moving slowly, but CNH Industrial N.V. is moving fast to deliver our commitments. As there is today, there will always be a full suite of competitive construction equipment branded as Case or New Holland Construction available through our construction dealer network and our agriculture dealer network as well. With no urgency or pressure for outcome, we have restarted discussions with several players about the partnering options for our construction business.

To fully leverage our brand strength and reach, we will explore partnership options to regain a strong footing in the recovering global consumer construction industry. If there is news to share, we will include those in our earnings calls in 2026 or 2027. This concludes our prepared remarks, and we can now start the Q&A session.

Operator: As a reminder, if you would like to ask a question, please press 1 on your telephone keypad. If you would like to withdraw that question, again, press 1. To allow time for as many participants as possible, please limit yourself to one question and then return to the queue for any follow-up questions. We will take our first question from Steven Fisher with UBS. Please go ahead.

Steven Fisher: Great, thanks. Good morning. Just wanted to clarify the inventory situation. It sounds like you did not hit the $1,000,000,000, but it is really just because of Europe. Can you just comment a little bit on the progress in North America? And then just to frame that in terms of how you see the setup for 2027, it sounds like your second half of the year seems like it is going to be a little more positive in ag than the first half. Is that sort of a reflection yet of the setup for 2027, or is it just easier comps? Thank you.

Gerrit Marx: Hey, Steven. Let me take that one. We have made good progress. And by design, we slowed down a little bit the dealer destocking, particularly in Europe, as I mentioned, because of the market coming back and us getting ready for the season. We had similar stock-ups in some lines by design in South America in order again to be ready for the season 2026 to come. So for us, this was about a $100,000,000 to $150,000,000 shortfall versus the target we gave ourselves at the beginning of the year, which was around $1,000,000,000. We landed at $800,000,000. This is a great accomplishment by the team globally.

But now as we are now scratching more and more towards the lower levels of inventory, we have to be pretty smart about how deep we want to dip in inventory because when the market returns, and it will not return in a sudden rush, it will return steadily, we want to be ready with high-quality machines and the full lineup in all the regions where we operate as we go through 2026. But the dealer destocking by and large is accomplished in the last two years. 2026 is now a bit of fine-tuning by product lines and by market depending on how the different segments are moving.

So as we will continue to talk about here and there some destocking, as Jim said, also we will talk about underproducing retail pace in Q1. This is now for us more like the last innings of that journey, and we will see when the market starts to show signs of life and a better trajectory as we finish 2026 and enter into 2027. So now it is about not going too low, actually, and we will see what that means by market and by region.

Operator: Your next question comes from the line of Kristen Owen with Oppenheimer. Please go ahead.

Kristen Owen: Good morning. Thank you for the question. I really appreciate all of the incremental color on the guidance and in particular Q1. As I am furiously writing down these notes, I am wondering, can you maybe help us put it all together in something that would look like an EBIT bridge for 2026? How much of that incremental savings that you are expecting versus the offset of mix versus the offset of geo? Can you kind of build a bridge for us just so we can put that together into the context of the 2026 margin guidance? Thank you.

James A. Nickolas: Good question, Kristen. So happy to answer that. For ag, volumes are about 190 basis points of reduction in margin walking from 2025 to the full-year margin. Geo mix, we said up to 50 basis points, so call it 25 for purposes of modeling, 25 basis point negative. Price, call it 175 basis points midpoint of our price guide, 1.5 to 2. Tariffs, about a 110 basis point headwind. And then operational improvements combined with the higher SG&A netting about 25 basis points improvement. So that should get you around 5% midpoint for 2026.

Operator: Your next question comes from the line of David Raso with Evercore ISI. Please go ahead.

David Michael Raso: Hi. Just following up on that. I just want to clarify first before my question. The first quarter ag profitability, I just want to make sure I heard correctly about the plus or minus ag segment EBIT. Is it basically around breakeven for the quarter? Just to clarify?

James A. Nickolas: Yes, that is right.

David Michael Raso: Okay. I am just trying to think about the guide, what it implies for the rest of the year, right, the first quarter is down, talking ag, right, down 5% on revs year over year, breakeven. Means the rest of the year, sales are still down 2% the subsequent nine months, but your margins are up a little bit year over year. And I am just trying to figure the cadence of that, assuming those numbers are right. The cadence of that, when do we start to see the margin improvement despite sales still down? And maybe the cadence on the sales?

James A. Nickolas: You will see margin improvement beginning in Q3, but I will just call it second half. Better margins, better profits in total. Q2 we expect to be much better than Q1 sequentially, but not quite as good as 2025.

Operator: Your next question comes from the line of Timothy W. Thein with Raymond James. Please go ahead.

Timothy W. Thein: Yeah, thank you. Jim, maybe just going back to your comment on when you kind of walked through the dynamics on margins in ag. On the 150 to 200 basis points of price, can you maybe just give us some regional color as to the expectations for 2026? What is in backlog and just how you are thinking about the contribution. Is there a notable geographical contribution or difference you think about that? Thank you.

James A. Nickolas: Yeah. I think North America is probably the leader in terms of price growth, followed by EMEA. That is where we are getting most of the pricing in 2026.

Operator: Your next question comes from the line of Mig Dobre with Baird. Please go ahead.

Peter Kalemkerian: Hey, guys. This is Peter Kalemkerian on for Mig this morning. Thank you for taking my question. Quick one here for me on South America ag. Your industry forecast, call it down 5% to 10% between tractors and combines. That is a bit more negative than your peers who have outlined more of a flattish retail environment. Is there any color you could provide on what you are seeing in that market? And is there any significant difference between Brazil and elsewhere on the continent?

Gerrit Marx: Yeah. Look. I think we are just cautious here on the market. We have elections coming up. We are very, very close to our dealer partners as well as our farmers directly. We have carefully listened, particularly as we closed last year, to what they expect to happen in 2026. And I think there is a fan of outcomes for South America in total. It depends on several factors, one of which is the global trade, and is China going to really start buying those 25,000,000 metric tons of soy from North America or more or less and how and who is running in Brazil for presidency.

I think there are so many unknowns that we took a cautious view here on the market in South America. And I think, look, Argentina has shown signs of momentum here also politically. There was quite some support. But I would not necessarily call it out as a bright spot in South America. I mean, Brazil is clearly what pulls the region and there is not an upside to be expected from Venezuela in case you were wondering about that. So this is the entire region is predominantly Brazil followed by Argentina, and we see replacement demand now forcing a continuous, you know, at a level that we currently see in the machine sales.

But I would not go that far and say this is now going to be a rebound in 2026 as we actually did expect last year to see more life in South America this year, but at this point, with all the factors that I mentioned, we will still need to see and watch a few more quarters to see what happens. But that is why we are a bit more cautious on this end. But in the end, the market is the market, and we are less forward-leaning here.

Operator: Your next question comes from the line of Kyle David Menges with Citigroup. Please go ahead.

Randy: Hi, good morning. This is Randy on for Kyle. Just going back to some of your targets you laid out, on the target to reduce the ag dealers by a third by 2030, and then increase sales of the blended dealers over the same timeframe. Should we think about progress on these two initiatives as kind of linear over the next couple of years or more back-end loaded, or I guess just how should we be thinking of your progress and the timing that we should be expecting to see some of those things flow through?

Gerrit Marx: Randy, that was kind of hard to understand what the question was. Was it about sales and inventory development? Through dual-branded dealers, the progress. Okay. So through dual-branded dealers. Look. This is a steady advancement on this number. I mean, you have seen a number of deals. We just had another one announced in Q1, where we basically converted the largest network of one of our smaller competitors completely to CNH Industrial N.V., effective immediately more or less. And these moves are all going to be multi-brand out of the gates. And we have picked up a lot of positivity and, as expected, by the way, a forward-leaning attitude from our strongest dealer partners.

And strongest means not only in terms of size, largest, but also most ambitious dealer partners to be consolidators in their respective regions with multi-brand attitude. So I think from the multi-branding percentage point of view, expect that to be a steady growth. We will have a few bigger hits in the earlier years, but then it will be a long grind through the tail of the network where we possibly here and there decide to not have all the brands in a particular region. Because, again, our target is not to have all the brands everywhere. We never said that.

We said, where it makes sense, we will have dual-branded dealerships in North America, South America, as well as in Europe. There might be regions where we just have New Holland or we just have Case because it is the farming in the region that requires only one brand. We will be smart about it. So that is how to think about it. It is steady, a few big ones coming over the more near term, and then a long grind through the tail of the network, overall setting ourselves up to once and for all finally focus on who competition is that is not the other CNH Industrial N.V. brand.

Operator: Your next question comes from the line of Joel Jackson with BMO Capital Markets. Please go ahead.

Joel Jackson: Good morning. Thanks for taking my question. Just a two-parter looking at North America. We have seen farmer sentiment come down across a whole bunch of different metrics and articles and things that associations talk about. The first part of the question would be, can you comment about just what is going on with farmer sentiment in the States, how your view of it is, how it may play out for your sales? Second part of the question would be, we have also seen in the U.S. in the political arena a lot of talk about equipment and crop inputs and what the government might want to do on some initiatives going forward. Any views on that?

Any you want to talk about that?

Gerrit Marx: Thanks, Joel. The farmer sentiment in North America is not great. And you are reading the same articles, plus we have a lot of conversations directly with them. And the farm income for 2026 is projected to be more or less flat, slightly up. You need to dig into the data to see some positive elements here, but it all comes back down to the commodity prices for the usual commodities, soy and corn. And at this point, there is no relief really in sight for those, and hence, the farmer sentiment remains where it is at this very moment. We will see what happens, what the administration in the United States has in store.

There is a great level of attention to farmers and to the agriculture industry in total. And there is a great deal of help being prepared. I do not know exactly what is going to happen. We have a list of things that are under discussion, but we will see what the administration is going to put in place over the next couple of months and the near term in 2026. As a matter of fact, I am actually on my way to Washington tomorrow to meet my peers and to have meetings to exactly discuss these points.

Operator: Your next question comes from the line of Angel Castillo with Morgan Stanley. Please go ahead.

Angel Castillo: Hi, good morning. Thanks for taking my question. I just wanted to revisit a little bit more on the comments around Europe earlier. You had mentioned some green shoots. If you could unpack that a little bit more. And, Gerrit, you outlined a pretty robust product launch pipeline here. Just can you talk about which of these we should be watching closely in terms of particular product lines that you are perhaps most excited about in terms of maybe unlocking or having a more meaningful impact on your ability to compete and gain share, particularly in Europe, but any other region that stands out would be helpful.

And then just broadly, if you could talk about the competitive environment in Europe, that would be helpful. Thank you.

Gerrit Marx: Okay. I mean, asking me about product risks the rest of the call. So let me pick a few items here that are particularly exciting for me. We showed at the AgriTechnica a completely renewed short wheelbase and long wheelbase, midrange tractor lineup with horsepower ranges that we have never had before. I mean, our horsepower range was all the way up to 300, 340 in the European midrange tractors, and we are now offering a lineup all the way up to 450 where we never played. And the feedback from farmers who now pick our brand and our color over the other that they usually had is really encouraging.

And with our attitude and focus on quality first, we will supply these machines with great care at low quantities in 2026 before we start scaling when the market comes back. That is super exciting. I mean, the feedback we have received on our next-gen combine over the last two years is overwhelming. When we look at the shipments that we have, whether it is to Australia, New Zealand, North America, across North America and Europe, the start of the next-gen combine in the field across and around the world is really good. So that is pretty good.

Another thing that is super exciting for me, and maybe you will think this is small, but it is not, is the cotton picker. That is why I have mentioned that. We would be the only other manufacturer with a round-baler integrated cotton picker that is going to be one of the center machines in the farming system for farmers in South America, for farmers in Australia, but also in the Southern states of the United States. In order to build a multicolor fleet here versus just a single color. I mean, that is the cotton picker that we were missing for quite a while. We have our new compact tractor coming out of India as we speak right now.

All new. They reach these shores very soon, and then the utility light tractor lineup, which we did not have really at this level of technology before, is also entering production in 2026. So we are all over the place on the products and with quality as a mindset. These things will start to show at low quantities in 2026 and then accelerate in quantum and financial impact in 2027 and going forward. When you think about Europe, I mean, there are a couple of positives that are clearly around the resilience of that region and good momentum and state support in markets like Germany, Poland, Eastern Europe here and there.

That has actually helped mainly the tractor sales in Europe, while combines are still low, and we are pretty strong in combines there. So that is an adverse product mix. It was an adverse product mix in 2025, and it is still a little drag in 2026. So it is mainly tractors in Europe, mainly Germany, German-speaking, Eastern Europe a bit, that we have seen and observed in Europe, but I would not call this a recovery or a swing in the market necessarily. This very much depends also on the global trade environment. You know, Mercosur is out there, and farmers have already reentered the cities with their tractors protesting against the Mercosur agreement.

So I think it is the region with the best growth potential in terms of TIV for our industry in 2026 and maybe also 2027, but we have to be cautious there because it is still a little fragile, and the stability and the solidity of the European Union and their ability to make coordinated decision-making when it comes to such important interest groups like farmers, we will need to see where this will land. But it is, from all the signs that we see, the region with the better momentum of all the big ones.

Operator: Your next question comes from the line of Daniela Costa with Goldman Sachs. Please go ahead.

Daniela Costa: Hi, good afternoon. Thanks for taking my question. Maybe just a clarification on something I did not hear correctly on where did the pre-buy come. Did you just say that it came from Europe particularly? And then my main question was regarding everyone is talking a lot about AI and simplifications, and given you have so many self-help actions going on, are you finding any incremental where maybe AI could help you push faster with savings?

Gerrit Marx: Hi, Daniela. So, yes, the positive is mainly around Europe. So that is true. It is mainly Europe, and it is mainly tractors. That was my comment here. What we see in the near term. We will see or what we do see is basically, if you start on the other side of the world, like Australia, New Zealand, that is basically all replacement-driven. That region is not really impacted by tariffs, and it is a fairly steady market, and we have seen that this is going to bottom out, and it is already on a more positive trajectory as we can see.

We are holding our grounds in China quite well, and actually we are gaining here and there in the non-Chinese brand universe there, so that is okay. In India, we have had the highest ever market share of CNH Industrial N.V. in the region. We are scouting for the next site for small and compact tractors and continue to grow market share there and make this a hub for utility and compact for CNH Industrial N.V. global. And, look, the AI application is everywhere in our company. I know we are distinguishing between not only generic, but also agentic AI.

We have launched it in our FieldOps platform where we basically connect different agentic AI in order to provide a fully connected experience. We have, in our machines, contextual AI running as we speak, and when it comes to back office and structure costs, we are looking at AI applications in order to speed up and drive efficiency into our processes. Because overall, I think in CNH Industrial N.V., we have a pretty substantial upside in getting leaner when it comes to SG&A, and there is a good potential here for the application of solutions that are driven by either generic or agentic AI, and we are on top of these things.

But I am not committing any percentage number to AI at this point, because what we experience actually is that it drives the outcome much faster, more efficiently, and we are getting more for the same at this point while, obviously, also cost savings are part of the mix.

Operator: Your next question comes from the line of Edward Randolph Jackson with Northland Securities. Please go ahead.

Edward Randolph Jackson: Thanks very much. First question is pretty straightforward. You had a pull-forward, you said, in fourth quarter that normally would have been in first quarter. And by kind of pedaling around with your guidance and stuff, are we talking somewhere between $100,000,000 in terms of revenue in the fourth quarter that you would have normally expected to happen in the first quarter? That is my first question, and I have one more behind it.

James A. Nickolas: Yes. I think about $100,000,000 to $150,000,000 of those sales that happened in Q4 we would have otherwise expected to occur in Q1.

Edward Randolph Jackson: Okay. And then normalizing out for that and thinking through your inventories are, for conversational sake, at this point, your retail inventories are aligned with demand. You have generally been underproducing demand for a period of time. Is it a fair scenario to think that as we get to the back part of 2026 that you might be able to put up some revenue growth just simply because you will be able to produce to retail demand and not below it, and that we would be able to see that continue into 2027, absent even a turnaround in the cycle?

James A. Nickolas: Yeah. I think it is very fair. That is the way we are thinking about it. That is right.

Operator: Your next question comes from the line of Tami Zakaria with JPMorgan. Please go ahead.

Tami Zakaria: Hi. Good morning. Thank you so much. I wanted to ask about SG&A. I think it is a sequential step down more so than what we saw last year. So anything to call out and then how we should think about SG&A growth in 2026 versus 2025?

James A. Nickolas: Hey. It is Jim. SG&A came down in Q4 largely due to lower variable compensation expense, and so that was versus full-year 2025 versus full-year 2024. For purposes of modeling and guidance, we are assuming a normalized level of variable comp among other things. So SG&A, I would expect to grow next year, about 40 basis points or so headwind from SG&A growth.

Operator: Our last question comes from the line of Kristen Owen from Oppenheimer. Please go ahead.

Kristen Owen: Hey. Thank you so much for fitting in the follow-up. Just because it was not discussed in any of the other questions, I was hoping you might be able to touch on the free cash flow guidance and in particular, your CapEx outlook seems like a pretty sizable step up year on year. So I am just wondering if you can provide some color on that, if that is related to what you are doing on the dealer side or anything else we should be considering. Thank you.

James A. Nickolas: Yeah. Happy to answer that. It is a great question. So there are multiple reasons it is growing in 2026 versus 2025. The primary use of that extra CapEx is to enhance and improve our manufacturing facilities. The best time to get that done and deployed is when the factories are slow, and we want to get that done before the upturn and things pick up in a bigger way in 2027. So that is the majority of the extra CapEx. But to your point, it is also being used to some degree for dealer enhancements.

And also, our strategic sourcing plan and program, we have to buy new tooling for that as well to help keep that pipeline of savings coming forward as well. So it is mostly manufacturing, some manufacturing footprint moves. As you know, we are calling you today from Wichita. Some of the equipment is being moved from Burlington to Wichita among other places. So there is some money in there for those kinds of things as well. But primarily, enhancing manufacturing to get lower cost, more efficiencies, dealer enhancements, and also our strategic sourcing program.

Operator: And ladies and gentlemen, that does conclude our question and answer session, and it does conclude our call for today. Thank you for your participation, and you may now disconnect.

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