Mason Hawkins, the talented mind behind Southeastern Asset Management, has nearly $23 billion in total assets under management. On May 10, he increased his stake in CNH Global NV (NYSE:CNH) by more than 150% to 3.7 million shares. In the past twelve months, CNH Global NV (NYSE:CNH) has exhibited a tepid stock price performance, declining more than 2.6% while the S&P 500 gained more than 10.7% during the same period. Should we follow Mason Hawkins into CNH Global NV (NYSE:CNH)? Let’s find out.
Fast growth in the past three years
CNH Global NV (NYSE:CNH), based in the Netherlands, is involved in both agricultural and construction equipment industries, operating in three main business segments: Agricultural Equipment, Construction Equipment, and Financial Services. The majority of its revenue, $15.7 billion, or 76.6% of the total 2012 revenue, was generated from the Agricultural Equipment segment, while the Construction Equipment segment ranked second with $3.77 billion in sales.
In the past three years, CNH Global NV (NYSE:CNH) has experienced consistent growth in both top and bottom lines. Revenue has increased from $15.6 billion to nearly $20.5 billion whereas net income has climbed from $452 million to more than $1.14 billion in the same period. However, the company cash flow has been fluctuating in nature. Since 2010, its operating cash flow has fluctuated in the range of $994 million to $1.4 billion while free cash flow has decreased from $736 million to only $103 million. The lower free cash flow was due to higher capital expenditure for PPE and equipment on operating leases. In 2012, CNH Global NV (NYSE:CNH) spent $556 million for PPE, $50 million for software, and $476 million for equipment on operating leases.
CNH is trading around $43 per share with a total market cap of $10.5 billion. The market values CNH at 8.2 times EV/EBITDA. Interestingly, CNH is the cheapest when compared to its U.S. peers, Caterpillar Inc. (NYSE:CAT) and Deere & Company (NYSE:DE).
Caterpillar – a global leader in construction and mining equipment
Caterpillar Inc. (NYSE:CAT) is the global leader in construction and mining equipment gas turbines and diesel-electric locomotives, with the majority of its revenue derived from the Machinery and Power Systems segment. Recently, Caterpillar Inc. (NYSE:CAT) reported sluggish first-quarter results. Revenue declined 17.3% to $13.2 billion while net income experienced a free fall of 45%, from $1.58 billion, or $2.37 per share, in the first quarter last year to only $880 million, or $1.31 per share, this year.