CNH Industrial N.V. (CNH) stock intrinsic value fair value estimate & owner earnings analysis

CNH makes farm and construction equipment. Agriculture is by far the larger segment (2025 net sales of $12.4 billion versus $3.0 billion for Construction) and is led by the Case IH and New Holland brands, sold mainly through independent dealers (more than 2,300 dealer owners in Agriculture). A captive finance arm funds dealer and customer purchases, which is why the company carries about $26.8 billion of debt at year-end 2025, of which about $4.4 billion sits in the industrial businesses and the rest in the finance arm, largely backed by receivables. Sales are spread across North America, Europe/Middle East/Africa, South America and Asia Pacific. How we measure earnings. We start from operating cash flow, remove swings in receivables, inventories, payables and provisions, subtract stock-based pay, and subtract capital spending that keeps the business running. We count spending on equipment that CNH leases to customers as capital spending ($655 million in 2025), because the depreciation on those assets is added back in cash flow. We measure the post-2021 business only, since the Iveco trucks business was separated in January 2022. Per diluted share, owner earnings were about $1.03 (2021), $1.28 (2022), $0.85 (2023), $0.66 (2024) and $0.29 (2025). The $172 million non-cash research-and-development impairment in 2025 is a sunk cost and is not deducted again. We use the median of these five years, about $0.85 per share, as normal earning power. That window contains the 2022-23 peak and the 2025 trough of the farm equipment cycle. We deliberately do not use the depressed 2025 figure as the anchor. What happened in 2025. Owner earnings fell about 57% from 2024. Agriculture net sales fell 11.5% (North America down 26.4%) as demand for large tractors and combines dropped, and tariffs and lower production volumes lifted cost of goods sold to 80.7% of sales from 78.3%. Management describes 2025 as part of a cyclical downturn. In the first half of 2026, revenue was roughly flat ($8.6 billion versus $8.5 billion) but net income was $145 million versus $344 million and operating cash flow was $180 million versus $934 million, so no recovery is visible yet. Growth reconciliation. Actual owner-earnings growth in 2025 was about -57%. Our base case begins at $0.35 per share in year 1 (a rise from $0.29) because the first-half 2026 results show revenue no longer falling; we do not credit the 2025 decline reversing faster than that. The base case then climbs to $0.55 and $0.75 in years 2 and 3 and returns to the $0.85 normal level in year 4. That is a return to a level the business has already reached (2021-2023 averaged above it), not new growth. We credit no growth beyond it: no market expansion, share gains, new products or margin improvement is included, and no benefit from buybacks. The level then continues flat indefinitely because the Case IH and New Holland brands, dealer network and installed base have operated through several cycles. Base case value is about $13.3 per share. Bear case ($6.2 per share). Tariff cost pressure, which management expects to remain elevated into 2026, persists, and North American large-farm demand does not recover. Owner earnings stay near $0.15-$0.30 for three years and settle at $0.40, roughly the average of 2024 and 2025 less some tariff drag, with no return to the normal level. The heavy borrowing in the finance arm and $4.4 billion of industrial debt make this case more fragile: a credit-quality problem in the loan book would hit earnings directly. We do not deduct debt separately, as interest is already paid out of the cash flow we measure. Bull case ($18.2 per share). Volumes recover quickly to the levels of 2021-2022: $0.50, $0.80 and $1.05 in years 1-3, then $1.15 a year, which is about the average of 2021 and 2022. This uses only levels the business actually produced, at prices and volumes it has already seen. Something we could not reconcile from the filings: the company's statement of cash flows shows large swings in receivables and payables that mostly reflect timing and financing of dealer inventory, so our working-capital adjustment could shift results year to year. If the lease fleet is largely resold at prices near book value, our deduction for lease-asset spending would be somewhat overstated. Also, Exor N.V. holds about 45.5% of the voting power, a concentration of control that minority holders cannot influence. What would make this wrong: a sustained multi-year farm downturn worse than 2025, tariffs that cannot be passed through in price, or losses on financing receivables. The margin-of-safety price of $7.00 sits close to the bear case because the business is cyclical, heavily financed, and currently earning well below its normal level.