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Earnings Estimates Moving Higher for CNH (CNHI): Time to Buy?

CNH Industrial (CNHI) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.

The upward trend in estimate revisions for this truck, tractor and bus maker reflects growing optimism of analysts on its earnings prospects, which should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- is principally built on this insight.

The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.

For CNH, strong agreement among the covering analysts in revising earnings estimates upward has resulted in meaningful improvement in consensus estimates for the next quarter and full year.

The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:

12 Month EPS

Current-Quarter Estimate Revisions

The company is expected to earn $0.15 per share for the current quarter, which represents a year-over-year change of -25%.

Over the last 30 days, one estimate has moved higher for CNH compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 8.91%.

Current-Year Estimate Revisions

The company is expected to earn $0.12 per share for the full year, which represents a change of -85.71% from the prior-year number.

There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, one estimate has moved up for CNH versus no negative revisions. This has pushed the consensus estimate 13.84% higher.

Favorable Zacks Rank

Thanks to promising estimate revisions, CNH currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.

Bottom Line

Investors have been betting on CNH because of its solid estimate revisions, as evident from the stock's 6.2% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.


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