Don't Ignore the Strong Growth Potential in This Company

Equipment maker CNH Global (NYSE: CNH  ) is among the companies across the agriculture industry doing well right now. From those that make fertilizers to those that make farm equipment, the agriculture sector is solid.

I recently told you how cheap CNH was looking on the valuation front. The stock has shown an awesome run-up of almost 58% since then. And not surprisingly, it has reported superb third-quarter numbers. Let's revisit the company as a potential investment.

Solid all-round performance
What's working for all equipment makers is also working for CNH. Global demand for agricultural equipment has shot up on the back of strong crop prices and the resultant increase in planting and farming income. This is what helped drive up farm equipment giant Deere's (NYSE: DE  ) third-quarter agriculture equipment sales by a good 22%.

CNH's agricultural equipment sales grew by a solid 29%. With such equipment accounting for 77% of CNH's total sales in the third quarter, it's no surprise that the company's total revenues surged 30% from the year-ago quarter, to $4.6 billion.

CNH's other segment, construction equipment, did equally well as its new products and positive pricing strategies worked. Demand for construction equipment has been robust across most geographic regions. This played a big role in driving up Caterpillar's (NYSE: CAT  ) third-quarter revenues to an all-time high of $15.7 billion. Terex's (NYSE: TEX  ) third-quarter construction segment sales also shot up by 38.9% on the back of strong global demand. CNH's construction equipment sales were up 36% from last year.

Backed by such robust top-line growth, CNH's bottom line more than tripled from last year, to $274 million.

The right focus
CNH has been busy growing its business. It has been aggressively adding new products to its portfolio, some of which boosted CNH's last-quarter revenue. More new-product launches will come through next year.

What's noteworthy is that some of the new products are specially targeted at the Brazilian markets. Tractor plant upgrades in Brazil and capacity expansions in India are also under way. The company also recently joined hands with Semeato, a Brazilian agriculture machinery company, to widen its products reach in Latin America.

These moves clearly highlight CNH's focus in the emerging markets, a good move considering how more and more companies are eyeing these markets. Last month, peer Terex acquired a stake in Ritz do Brazil, a Brazil-based company that makes equipment for supporting power lines. AGCO (NYSE: AGCO  ) is keen on buying a sugar cane harvester-manufacturer in Brazil, and the deal could break through soon. Deere is planning to invest $124 million in building two factories in Brazil to cater to the burgeoning demand for construction equipment in Latin America.

CNH sure does not want to be left out in the race to make it big in this fast-growing region.

The Foolish bottom line
I see a lot of promise in CNH, primarily because of the industry it is in and its great growth initiatives. This stock should be on your watchlist.

The easiest way to keep track of CNH's progress is by adding the stock to our free and personalized My Watchlist service. It will keep you updated not just on CNH, but on all your favorite companies.

Neha Chamaria does not own shares of any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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