Tag Archives: agriculture
Deere Posts 3Q Record Earnings Of $997 Million
Jennifer DeWitt jdewitt@qctimes.com Deere & Co. Net quarterly net earnings Fueled by strong farm equipment sales, particularly in North and South America, Deere & Co. reported record earnings and sales for the third quarter Wednesday while increasing its forecast for its full-year income. The Moline-based equipment maker announced that net income jumped 26 percent on a 4 percent gain in sales and revenues. Net income for the quarter, ended July 31, was $996.5 million, or $2.56 per share. The results compared with $788 million, or $1.98 per share, for the same period last year. In a conference call with analysts Wednesday, Susan Karlix, Deere’s manager of investor relations, said the quarter marked Deere’s 13th consecutive quarter of record profits. Both sales and net income were the company’s “best-ever results” reported for a third quarter, she said. The results beat Wall Street’s expectations of $2.17 per share. The report sent Deere’s stock down $1.57 in trading Wednesday to $82.34 a share. The Quad-Cities’ largest employer raised its net income forecast for fiscal 2013 to $3.45 billion, up from $3.3 billion forecast three months ago. Company officials said, however, fourth-quarter equipment sales are expected to fall 5 percent against “a tough comparison” last year. “Last year’s fourth-quarter sales were particularly strong, in part because our factories were running at a high rate to catch up with customer orders,” Deere Chairman and CEO Samuel Allen said in a news release. “Even with this difficult comparison, our financial guidance implies a healthy level of income for the coming quarter and a third consecutive year of record results.” He added that the company’s “success is a reflection of considerable strength in the farm sector, especially in North and South America. We also are making further progress executing our wide-ranging operating and marketing plans, which call for expanding our global market presence while keeping a close watch on costs and assets.” Karlix told analysts that the lower forecast for agriculture equipment sales “does not indicate any change in our outlook for demand or global ag fundamentals.” Deere expects U.S. farm cash receipts to go down modestly, “but it still looks like they will be at historic high levels,” Deere spokesman Ken Golden said. “We know cash receipts is the No. 1 predictor of farm equipment sales,” he said, adding that farmers traditionally invest in new equipment when farm receipts are healthy. The company’s forecast predicts total U.S. farm cash receipts for 2014 to be $379.7 billion, down from the 2013 forecast of $389.8 billion. As part of the earnings report, Deere said net income for the first nine months of the year was $2.73 billion, or $6.97 per share, compared with $2.377 billion, or $5.88 per share, last year. Worldwide net sales and revenues increased 4 percent to $10.01 billion for the third quarter and rose 8 percent to $28.345 billion for nine months. In addition to agriculture and turf equipment, Deere manufactures construction and forestry equipment. The company’s financial services division also helped drive results with its 38 percent increase in third-quarter profits. Financial services reported net income of $150 million for the quarter and $407.9 million for nine months, which compared with $110.4 million and $338.6 million last year. Sales of agriculture and turf equipment rose 8 percent in the third quarter and 12 percent for the first nine months on increased prices and higher shipment volumes. Meanwhile, construction and forestry sales decreased 11 percent in the quarter and 8 percent for nine months on lower shipment volumes. Deere now forecasts ag and turf equipment sales to increase about 7 percent for 2013 and construction and forestry equipment sales to decrease by about 8 percent for the year. It predicts total equipment sales to be up about 5 percent for the fiscal year. Crediting Deere’s workforce and business model, Golden said the construction and forestry division “is holding favorable profit levels despite the fact that sales have fallen considerably.” In the release, Allen indicated his optimism for the future. “We continue to believe our investment in new products and capacity will allow Deere to be the provider of choice for a growing global customer base in the years ahead,” he said. “In our view, broad trends based on a growing, more affluent, and increasingly mobile population have ample staying power and should help the company deliver substantial value to its customers, investors and other stakeholders in the future.” The optimism also has reached the dealer level, where at least one Quad-City area John Deere dealer is having “a very good year.” Paul Seyller, the owner of River Valley Turf in Davenport and Silvis, said last year’s drought was hard on his commercial customers and kept homeowners from investing in new lawn equipment. In addition, he said commercial lawn companies were hit last winter by a lack of snow removal jobs, which provides a part of their income. “Now they’ve had a good year of mowing, and they are starting to get cash reserves built up, so in the spring (next year), they will be making more purchases than ever,” he said, adding that this year has been strong with the municipal clients and homeowners. In addition, Deere’s new line of high-performance John Deere Gators is boosting sales. “It’s the most Gators we have sold in our 15 years in business,” Seyller said. Continue reading
Deere & Company (DE): Agriculture Leader Trading At 30% Discount
August 14, 2013 The second key to Deere’s long-term success is its leading position in developed economies including the US and Canada. In spite of recent weakness in crop prices, the US Department of Agriculture is projecting farm income to rise by 14% in 2013, totaling $128 billion. Those billions of dollars of income will be reinvested by farmers and producers, with an emphasis on upgrading older machines or simply buying new ones. Although not growing as quickly as it’s the South American region, North America is a huge market for Deere that continues to deliver steady sales and earnings growth. In addition to sales and earnings growth, Deere also carries a solid dividend yield of 2.5%. On the earnings front Deere is expected to grow earnings by 12% this year and 9% annually in the next five. That’s not exactly jaw-dropping growth, but Deere is a steady market leader in position to deliver steady and predictable returns. That is the right model and goal for a solid blue chip like Deere. But the best part of Deere right now is its valuation. Its forward P/E of 10x is a huge discount to its 10-year and peer average of 13x. The Takeaway Looking ahead, Deere will be facing some headwinds, with slow growth in Europe and rising production costs weighing on margins. But big picture, this is a great company and stocks for investors that are bullish on the long-term trend in agriculture. If shares simply traded with the same valuation as its peers, Deere would jump to $106, a 30% premium from current levels. Continue reading
Agriculture: The Good and Bad in a Sector that Looks Cheap*
By Martin Tillier, August 14, 2013 MOS) have borne the brunt of the losses in price as evidenced by a chart of an ETF that tracks them, Global X’s Fertilizer ETF SOIL . This has led many to conclude that there is value to be had there, but the news that caused the big drop at the end of last month is still relevant. The Belarusian Potash Company, a joint venture between Belaruskali and Russia’s Uralkali was unwound. This giant producer had enormous pricing power, and the ending of the cartel has produced a sharp drop in prices around the globe. The problem I see is that artificially high prices have, over the years, resulted in increased supply. This level of supply is still there and, at market pricing, it will be years before the supply and demand equation comes back into balance. In a few months, the recent bounce back may start to look like a pause in a medium term decline in the industry. Long term, it will undoubtedly present some opportunities, but the industry may well have further to fall before that happens. Agricultural supply companies not dependant on potash have also underperformed in general this year and the best value may be found there, but again, not all are equal. Monsanto ( MON ) is a controversial company because of their focus on genetic modification. That may continue to weigh on the stock, but my reasons for staying away have more to do with valuation and the technical look of the chart. The series of lower lows and lower highs evident here is hardly encouraging. Couple that with a P/E over 18 and the company looks, at best, fairly valued. The Good Valmont Industries ( VMI ) is not a pure play on agriculture. Their fabricated metal and coatings products have other applications, but the company was founded on irrigation systems and they are still their best known product. With a global concern about water usage and conservation, their expertise in that area should be invaluable in the future. They are a solid, profitable company and a P/E around 12 looks remarkably cheap. In this case, a bottom seems to have been found just above 130, which, if nothing else, gives a decent stop-loss level. Deere & Company ( DE ) is probably the best known agricultural supply company outside the industry, due to their consumer products division. They too have underperformed massively this year, losing a couple of bucks overall. Assuming continued gradual recovery in the consumer area and growing demand from agriculture, DE also looks good value at a P/E under 10. A more global play can be had by an investment in the IQ Global Agribusiness Small Cap ETF ( CROP ). This fund is actually up around 10% YTD, but has still underperformed the market. The fund’s focus on small cap agricultural businesses around the world makes it more risky than DE or VMI, but it is a pure bet on the growth of agriculture around the world. As demand increases, so technological advancement becomes key, and an investment spread amongst small companies makes it more likely that you will have a piece of “the next big thing” when it comes along. As the stock market continues to move basically sideways, the importance of identifying sectors with potential for growth is exaggerated. In the case of agriculture, the opportunity is there, but it is not universal. Internal dynamics could keep the fertilizer suppliers depressed for some time, but in other areas a simple return to the mean will provide a decent profit. We all eat (some more than others: see my picture above) and the world’s population continues to grow, so demand for the end product of agriculture is assured. It is possible to profit from this, but selectivity is the key. *I cannot tell you how strongly I had to resist the temptation to write a headline about “planting a seed” or “reaping a profit”! Read more: http://www.nasdaq.co…7#ixzz2c3QqpE81 Continue reading
