Deere & Company
) third quarter fiscal 2012 earnings were $1.98 per share compared
with the year-ago quarter's earnings of $1.69. Earnings missed the
Zacks Consensus Estimate of $2.32 per share.
Deere's worldwide total sales increased 15% year over year to
$9.59 billion, beating the Zacks Consensus Estimate of $9.49
Net sales of equipment operations (which comprise Agriculture
and Turf, Construction and Forestry) were $8.93 billion, a 16%
year-over-year increase including a price rise of 5% and an
unfavorable currency translation effect of 5%. On a geographic
basis, equipment net sales were up 28% in the United States and
Canada, and remained flat year over year in rest of the world.
Cost of sales in the quarter rose 16.6% to $6.8 billion.
Operating profit improved 12.6% year over year to $1.21 billion in
The Agriculture & Turf segment's sales increased 14% to $7.2
billion, led by higher shipment volumes and improved price
realization, partially offset by a negative currency translation.
Operating profit at the segment improved 18% to $1.0 billion.
The increase in operating profit resulted from higher shipment,
improved price realization, partially offset by higher raw material
and production costs as well as research and development
Construction & Forestry saw year-over-year sales growth of
23% to $1.66 billion, ascribed to higher shipment volumes and
improved price realization. The segment operating profit increased
2.7% year over year to $113 million, driven by higher shipment and
improved price realization, partially offset by higher production
and raw material costs along with higher expenses related to
SG&A and R&D.
Net revenues at Deere's Financial Services operations were $565
million in the reported quarter, up 2.7% from the year-ago quarter.
Net income in the segment was $110.4 million, down from $125.6
million in the year-ago quarter.
Results decreased year over year, driven by higher SG&A
expenses, narrow financial spreads and higher reserves for crop
insurance claims, partially offset by a higher credit portfolio and
lower provision for credit losses.
As of July 31, 2012, Deere had cash and cash equivalents of $3.4
billion, down from $3.6 billion as of July 31, 2011. Long-term
borrowings increased to $21.2 billion as of July 31, 2012, from
$15.9 billion as of July 31, 2011. Net cash used for operating
activities for nine months ended at fiscal 2012 was $1.14 billion
compared with $636.1 million in the corresponding prior-year
Deere expects equipment sales to grow around 13%, down from 15%
in fiscal 2012. The guidance includes an unfavorable
currency-translation impact of 4% for the quarter and 3% for the
year. Net income is projected at $3.1 billion, down from the
previous expectation of $3.35 billion.
Segment-wise, Deere expects worldwide sales of Agriculture and
Turf equipment to grow by 13%, down from the previous guidance of
15% for full-year 2012, which includes a 4% negative impact of
foreign currency translation.
Region-wise, Deere expects industry farm-machinery sales in the
U.S. and Canada to grow by more than 10% for 2012. While sales in
Western and Central Europe are expected to be flat; sales in the
Commonwealth of Independent States are expected to witness strong
Growth in Asia is expected to be down moderately due to soft
markets in China and India. In South America industry sales are
expected to be down by 5%-10% due to uncertainty and draught
conditions prevailing in Argentina. Industry sales of turf and
utility equipment in the U.S. and Canada are expected to be flat to
up 5%, driven by draught conditions in the U.S.
Construction and Forestry equipment are expected to improve 17%
for 2012, while world forestry markets would be flat year over
year. Net income from Financial Services is estimated at $450
million, down from $465 million.
The ongoing draught conditions prevailing in the U.S. may affect
Deere's performance in the fourth quarter. Moreover, soft economic
conditions in China and India are expected to weigh on revenues
Deere faces competition from the likes of
). Deere retains a short-term Zacks #4 Rank (Sell). We have a
long-term Neutral recommendation on the stock.
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