Deere & Company (DE): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


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Deere reported adjusted earnings of $1.83 per share in the fourth quarter of fiscal 2014, a 13.3% decline year over year impacted by less favorable product mix, lower shipment and production volumes and higher production costs. Deere expects to remain solidly profitable in 2015, reflecting its efforts to establish a more resilient business model. However equipment sales projected to decrease around 15% year over year in fiscal 2015. Deere also estimated Agriculture and Turf equipment sales to decline in 2015 as a result of weaker conditions in the global farming economy. Though long-term outlook for Deere remains strong on increased global demand for food, shelter and infrastructure. Hence, we are reaffirming our Neutral recommendation on Deere with a target price of $91.


Founded in 1837, IL-based Deere & Co., is engaged in the production and distribution of agricultural and forestry equipment, construction equipment and engines worldwide. The company sells products in the U.S. and Canada through branch offices as well as through distributors and dealers for the resale of products internationally. Deere & Co.'s credit subsidiary, John Deere Capital Corporation (JDCC) is one of the largest equipment finance companies in the U.S. with more than 2.4 million accounts. Deere currently reports operating results under three major business segments:

Agriculture and turf segment (Approximately 73% of total revenue in the third quarter of fiscal 2014) manufactures and distributes a full line of farm equipment and related service parts including tractors, sugarcane harvesters, sprayers, irrigation equipment, and more. Moreover, it manufactures and distributes equipment, products and service parts for commercial and residential use, which includes tractors for lawn, garden mowing equipment, golf course equipment, and more.

Construction and forestry division (19%) manufactures, distributes to dealers and sells at retail a broad range of machines and service parts used in construction, earthmoving, material handling and timber harvesting. The products and services produced by this segment are marketed primarily through independent retail dealer networks and major retail outlets.

The Financial Services (7%) primarily finances sales and leases by John Deere dealers for new and used agricultural, commercial and consumer, and construction and forestry equipment. It provides wholesale financing to dealers of the above equipments. It also provides operating loans, offers certain crop risk mitigation products and invests in wind energy generation.

Other revenues (Approximately 1% of total revenue in the third quarter of fiscal 2014) primarily comprises of the Equipment Operations' revenues for finance and interest income, and other income, net of certain inter-company eliminations.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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