Shares of CNH Industrial (CNHI -0.47%) fell as much as 14% on Monday morning after the heavy equipment manufacturer completed the separation of its truck and bus unit. The new bus company is falling, too, as investors reassess the value of the businesses from here.
CNH is a European industrial heavyweight, formed via the 2013 merger between Case New Holland and Fiat's heavy equipment group. But the company of late has been focused on getting smaller, in 2019 announcing plans to split off the truck and bus division to focus on agriculture equipment.
That split became official on Monday, with Iveco Group debuting on the Milan stock exchange. The idea is to separate the "on highway" assets from the "off highway" business, and allow CNH to bypass the billions in investment needed to prepare trucks and buses for rigorous new emissions standards.
Daimler made a similar move last month, separating Daimler Truck Holding from its Mercedes-Benz car unit.
But investors were unimpressed, sending shares of CNH tumbling and Iveco down as much as 11% in Milan.
Given how long this split has been in the planning stages, one might have expected investors to feel a relief it was over. It's hard to read too much into the first day of trading, as various mutual funds are likely adjusting their holdings to account for the separation, but there is reason to be bullish on CNH long-term.
While the agriculture market is competitive, it does not face the same mandate to quickly move away from diesel that trucking is facing. There is also less investment in autonomous technology up ahead. Analysts also predict we are entering a global cycle of farm equipment renewal, which should provide a solid tailwind for the streamlined business into 2022 and beyond.
CNH will have a chance to make its case to investors next month when it holds a capital markets day. Hopefully by then investors will have more clarity about what lies ahead for the new agriculture-focused company.