To my surprise, I recently discovered that agricultural-equipment ace CNH Global (NYSE: CNH ) is a majority-owned subsidiary of Italian automotive group Fiat. Instead of Ferraris and Maseratis, CNH manufactures forklifts and mini-wheel loaders. That may sound mundane, but the firm's most recent financial results are about as luxurious as they come.
Net equipment sales soared 29%, with agricultural equipment driven by strength around the globe, and construction equipment supported by Latin America and other emerging markets. Equipment operating margin set a record, and per-share earnings jumped 52%. Before restructuring charges, which were heavier in 2007, EPS was up 42%.
Latin America is worth a few more words. The market for tractors and combines is simply exploding. Industrywide volume for the former was up 31% over last year's second quarter, while combine volume more than doubled. The company is naturally facing some bottlenecks, and it has decided to reopen a Brazilian facility. This excess demand is a pretty nice problem to have, and CNH is fortunate to have the support of Fiat in its efforts to improve global manufacturing efficiencies.
On the construction-equipment side, there's something of a divergence between light and heavy equipment. The light stuff, used in residential and commercial construction, is naturally feeling some housing pain. Not to the degree of a USG (NYSE: USG ) or a Pulte Homes (NYSE: PHM ) , mind you, but there's still a pinch. CNH is expecting worldwide light equipment sales to fall 5% to 10% for the full year.
Meanwhile, heavy equipment is linked more to major government infrastructure projects, so emerging-market growth is more than offsetting any Western weakness. This segment is the mirror image of light equipment, with 5%-10% top-line growth expected for the year.
Like larger rival Deere (NYSE: DE ) and smaller folks like AGCO (NYSE: AG ) and Gehl (Nasdaq: GEHL ) , CNH looks to occupy a pretty cozy part of the market today. The company may lack the extraordinary tailwinds of a fertilizer supplier like Mosaic (NYSE: MOS ) , but its pricing power is still evident.
CNH is rated four out of the maximum five stars in Motley Fool CAPS. Think it'll continue to plant profits? Join in with your own rating right here.
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