10-Q: CNH Industrial Q3 Earnings Plunge Amid Weak Demand, Impairments

CNH Industrial N.V. reported a significant decline in net income and revenues for the third quarter and first nine months of 2025, driven by lower industry demand, channel destocking, and notable impairment charges.

Summary

• Net income attributable to CNH Industrial N.V. for the three months ended September 30, 2025, was $80 million, a substantial decrease from $306 million in the prior-year period.
• Total revenues for the three months ended September 30, 2025, declined by 5.5% to $4,399 million (down 6.7% on a constant currency basis) compared to $4,654 million in 2024.
• For the nine months ended September 30, 2025, net income attributable to CNH Industrial N.V. was $424 million, down from $1,073 million in the same period of 2024.
• Total revenues for the nine months ended September 30, 2025, decreased by 13.5% to $12,938 million (down 12.7% on a constant currency basis) compared to $14,960 million in 2024.
• Basic earnings per share for the three months ended September 30, 2025, was $0.06, down from $0.24 in 2024, and for the nine months, it was $0.34, down from $0.85 in 2024.
• Adjusted EBIT of Industrial Activities for the three months ended September 30, 2025, was $104 million, a decrease from $336 million in 2024, primarily due to lower shipment volumes, tariff costs, and higher SG&A expenses.
• Agriculture segment net sales decreased by 10.5% to $2,963 million in the third quarter of 2025, driven by lower shipment volumes and channel inventory destocking in North America.
• Construction segment net sales increased by 7.6% to $739 million in the third quarter of 2025, reflecting higher shipment volumes in North America and EMEA, along with favorable net price realization.
• Financial Services net income for the three months ended September 30, 2025, was $47 million, a decrease of $31 million from 2024, mainly due to increased credit risk provisions and higher SG&A expenses.
• A $49 million impairment charge related to Bennamann in-process research and development (IPR&D) assets and a $10 million inventory write-down for the New Holland T6.180 Methane Power Tractor were recognized in the third quarter of 2025.
• The allowance for credit losses increased to $628 million at September 30, 2025, from $424 million at December 31, 2024, primarily due to Brazilian market conditions, including crop prices, flooding, and drought events.
• A material weakness in internal control over financial reporting related to the existence and completeness of raw material and work-in-process inventory remains unremediated as of September 30, 2025.

Sentiment

Score: 3

Explanation: The filing indicates a significant deterioration in financial performance with substantial declines in net income, revenues, and EPS for both the quarter and year-to-date periods. This is compounded by impairment charges, increased credit risk provisions, and an unremediated material weakness in internal controls, suggesting considerable operational and financial challenges.

Positives

• The effective tax rate for the three months ended September 30, 2025, decreased to 2.0% from 20.8% in 2024, primarily due to geographic income mix and discrete items, including favorable provision-to-return adjustments.
• The SEC Staff concluded its inquiry into the Company's revenue recognition and sales practices on July 25, 2025, and did not intend to recommend any enforcement action.
• Restructuring expenses decreased significantly to $3 million for the three months and $14 million for the nine months ended September 30, 2025, from $12 million and $94 million, respectively, in the prior-year periods.
• Construction segment net sales increased by 7.6% in the third quarter of 2025, reflecting higher shipment volumes in North America and EMEA.
• The Company extended the maturity date of its five-year credit agreement by one year to April 19, 2030, demonstrating continued access to financing.

Negatives

• Net income attributable to CNH Industrial N.V. decreased by 73.9% for the three months and 60.5% for the nine months ended September 30, 2025, compared to the prior-year periods.
• Total revenues declined by 5.5% for the three months and 13.5% for the nine months ended September 30, 2025, primarily due to lower shipments on decreased industry demand and continued channel destocking.
• Basic earnings per share decreased by 75% for the three months and 60% for the nine months ended September 30, 2025.
• Adjusted EBIT of Industrial Activities decreased by 69.1% for the three months and 64.5% for the nine months ended September 30, 2025, reflecting lower shipment volumes, tariff costs, and higher SG&A expenses.
• Cost of goods sold as a percentage of net sales of Industrial Activities increased to 80.9% in Q3 2025 from 78.3% in Q3 2024, impacted by lower production volumes and tariff costs.
• Selling, general and administrative expenses increased by $123 million in Q3 2025, primarily due to higher credit risk provisions in the Financial Services segment and higher labor costs.
• A $49 million impairment charge was recorded related to Bennamann IPR&D assets in Q3 2025 due to reduced projected cash flows and a narrowed strategic focus.
• A $10 million inventory write-down was recorded for the New Holland T6.180 Methane Power Tractor in Q3 2025.
• The allowance for credit losses increased by $204 million to $628 million at September 30, 2025, reflecting adverse Brazilian market conditions and higher delinquencies.
• Receivables greater than 30 days past due as a percentage of receivables for Financial Services increased to 3.5% at September 30, 2025, from 2.2% at September 30, 2024, mainly due to higher delinquencies in Brazil.
• Retail loan originations, including unconsolidated joint ventures, decreased by $0.2 billion for the three months and $0.4 billion for the nine months ended September 30, 2025, compared to 2024.

Risks

• Global economic conditions, including geopolitical events, shifts in trade and economic policies, and changes in commodity prices, create disruptions and uncertainties.
• Production and supply chain disruptions, including industry capacity constraints, material availability, and global logistics delays, are expected to persist.
• Changes in government policies regarding banking, monetary and fiscal policy, legislation (agriculture, environment, debt relief, trade), and international trade and investment (sanctions, tariffs) could impact the business.
• Volatility in international trade caused by tariffs and retaliatory measures could affect product demand and costs.
• Actions of competitors in the various industries in which the Company operates pose a risk.
• Development and use of new technologies and technological difficulties, as well as compliance requirements for engine emissions and safety, are ongoing challenges.
• Interest rates and currency exchange rates, inflation and deflation, and energy prices can impact financial results.
• Prices for agricultural commodities and material price increases affect customer profitability and purchasing power.
• The resolution of pending litigation and investigations on a wide range of topics, including product liability, emissions, intellectual property, and dealer disputes, could result in substantial damages or fines.
• Security breaches, cybersecurity attacks, technology failures, and other disruptions to IT infrastructure of CNH and its suppliers and dealers are potential threats.
• The Company's pension plans and other post-employment obligations are subject to market fluctuations and actuarial assumptions.
• Political and civil unrest, volatility and deterioration of capital and financial markets, and pandemics could adversely affect operations.
• A material weakness in internal control over financial reporting related to the existence and completeness of raw material and work-in-process inventory remains unremediated, posing a risk of material misstatement.

Future Outlook

The global economy is experiencing disruptions and uncertainties due to geopolitical events, shifts in trade and economic policies, commodity price changes, and climate conditions, which are expected to persist through the rest of 2025. These factors are anticipated to affect customer profitability, purchasing power, and demand for products. The Company believes its current cash and cash equivalents, access to credit facilities, and future operating cash flows will be adequate to fund its known cash needs.

Management Comments

• Management believes that the disclosures are adequate to present fairly the financial position, results of operations, and cash flows at the dates and for the periods presented.
• Management believes that the costs associated with the Waste Sites will not have a material effect on the Company's business, financial position, or results of operations.
• Management is of the opinion that the outcome of these matters will not have a material adverse effect on the Company's financial position or results of operations.
• CNH believes that its cash and cash equivalents, access to credit facilities and cash flows from future operations will be adequate to fund its known cash needs.

Industry Context

The capital goods sector is facing significant headwinds from global economic disruptions, including geopolitical events, trade policy shifts, and fluctuating commodity prices. These factors are impacting customer confidence and demand for agricultural and construction equipment. While global industry volume for construction equipment showed modest increases (6% for Heavy, 3% for Light) in Q3 2025, the agriculture sector experienced declines (tractors over 140 HP down 41% in North America, combines down 23%). Financial services are also affected by regional economic conditions, particularly in Brazil, where crop prices and extreme weather events have led to higher delinquencies.

Corporate Governance

Legal Proceedings

• Follow-up on Damages Claims: Iveco S.p.A. and its competitors were subject to a European Commission investigation (1997-2011) regarding business practices in the European Union for Medium and Heavy trucks. CNH cannot be excluded from current and future follow-on proceedings, but has recourse against Iveco and IMAG for reimbursement of any damages paid.
• FPT Emissions Investigation: German criminal investigations concluded in December 2023. FPT Industrial S.p.A. is defending individual civil claims alleging emissions' non-compliance in Germany and Austria. CNH believes the risk of FPT Industrial or Iveco Group N.V. defaulting on potential payment obligations is remote.
• SEC Subpoenas: The SEC Staff concluded its inquiry into the Company's revenue recognition and sales practices on July 25, 2025, and did not intend to recommend any enforcement action to the Commission.
• Environmental Claims: CNH has received inquiries regarding 66 non-owned U.S. Waste Sites, 16 of which are on the National Priority List. Environmental reserves of approximately $24 million were established as of September 30, 2025. The Company believes these costs will not have a material effect on its financial position or results of operations.

Related Party Transactions

• EXOR N.V. held 45.4% of CNH's voting power as of September 30, 2025, and can significantly influence shareholder decisions. No significant transactions with EXOR N.V. directly during the reporting periods.
• Transactions with Iveco Group post-Demerger included the sale of engines from Iveco Group to CNH (purchases of $170 million in Q3 2025 and $489 million for the nine months ended September 30, 2025).
• Master Service Agreements (MSA) and Financial Service Agreements (FS MSA) are in place with Iveco Group, covering services like lease of premises, IT services, and wholesale/retail financing activities.
• Transactions with unconsolidated subsidiaries and affiliates involved net sales of $92 million in Q3 2025 ($266 million YTD 2025) and purchases of $118 million in Q3 2025 ($310 million YTD 2025).
• CNH had pledged guarantees and commitments totaling $112 million as of September 30, 2025, for its unconsolidated affiliate CNH Industrial Capital Europe S.a.S.

Stakeholder Impact

• Shareholders: Significant decline in net income and EPS is likely to negatively impact shareholder value and sentiment.
• Employees: Restructuring expenses indicate potential employee separation costs, though these were lower than the prior year.
• Customers: Lower industry demand and channel destocking suggest reduced sales volumes, potentially impacting product availability or pricing strategies.
• Creditors: Increased allowance for credit losses and higher delinquencies in Brazil indicate elevated risk in the financing portfolio, which could affect creditors of the Financial Services segment.
• Suppliers: Supply chain finance programs are in place, but overall lower production volumes could impact demand for supplier goods and services.

Next Steps

• The Company is evaluating the impact of new accounting pronouncements, including ASU 2025-06 (Internal-Use Software), ASU 2025-05 (Credit Losses), ASU 2025-03 (Business Combinations/VIEs), and ASU 2024-03 (Expense Disaggregation Disclosures).
• The Company expects to adopt the new disclosures required by ASU 2023-09 (Improvements to Income Tax Disclosures) on its Form 10-K for the year ended December 31, 2025.
• Remediation actions for the material weakness in internal control over financial reporting are ongoing, including engaging consulting professionals, planning full-physical inventory counts in the fourth quarter of 2025, developing standard operating procedures, and providing training.
• The Company plans to continue updating macroeconomic factors in future periods, as warranted, for its credit loss provisioning, particularly concerning Brazilian market conditions.
• The Company has a remaining one-year extension option available for its credit agreement, which matures on April 19, 2030.

Key Dates

Recommendation

The filing reveals a substantial decline in CNH Industrial's financial performance, with net income and revenues falling sharply across both the quarterly and year-to-date periods. This is exacerbated by significant impairment charges, an increase in credit risk provisions, and the persistence of a material weakness in internal controls over inventory. While the conclusion of the SEC inquiry without enforcement action is a positive, the overall operational headwinds, including decreased industry demand and channel destocking, present a challenging outlook. These factors collectively suggest a deteriorating financial position and increased risk, warranting a 'sell' recommendation for investors.

Keywords

CNH Industrial, Quarterly Report, Agriculture Equipment, Construction Equipment, Financial Services, Net Income, Revenue, EPS, Adjusted EBIT, Bennamann, Impairment, Inventory Write-down, Brazil Market, Credit Risk, Channel Destocking, Supply Chain Finance, Internal Control Weakness, Share Buyback, SEC Filing, 10-Q