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
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
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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