CNH Industrial (CNHI, Financial) (-48%, -3.21%), one of the world’s largest agriculture machinery manufacturers, was another top detractor for the quarter. CNH reported a weak fourth quarter, which was in line with our expectations given challenging end markets due to US-China trade war, weather and soft commodity prices. However, the company disappointed by revising down the 2020 earnings per share (EPS) guidance by 16% versus what was communicated to the markets in late 2019. CNH has not executed well in recent months, leading to inventory build-up and delay in delivery of cost efficiency targets. The stock came under added selling pressure due to its dual-listing in Italy, which has been one of the worst performing markets in Europe year to date, even though its look-through revenue exposure to Italy is less than 12%. To the positive, the agricultural segment, which represents over 60% of the value, is a relatively essential and stable business that has already been through several years of lean times. Smart capital allocation and improved execution by the company will be key as it navigates through this period. The company made a management change that we support in naming Chairperson Suzanne Heywood interim CEO as they seek to replace Hubertus Muhlhauser and appointing Oddone Incisa as CFO to replace Max Chiara. Heywood also serves as Managing Director at CNH’s majority owner EXOR, and we expect her, together with EXOR CEO John Elkann, to improve leadership and execution.
From Mason Hawkins (Trades, Portfolio)' Longleaf Partners first-quarter 2020 commentary.
