When a company runs into a problem, only one question
Is it temporary?
Farm equipment makerDeere (
) missed earnings estimates for the fiscal Q3 ended in July,
falling short of the Street's earnings number by 14% and revenue
At the earnings call on Aug. 15, Chief Financial Officer James
Field explained why. Half of the shortfall was due to soft market
conditions in China, India and Europe; import licensing delays in
Argentina; a weaker Brazilian real; and weather in the U.S.
Those difficulties have various shelf lives but none is
The other half of the shortfall was because of execution
problems and an early harvest.
The Street naturally gets nervous when a company talks about
execution problems. Deere's stock gapped down 6% in 365% greater
volume on the news.
Execution problems are never a good thing but some are less
bad than others. Deere's problems were on the manageable side.
The company had trouble ramping up production to meet demand for
an all new combine line.
"The good news is, we expect to make up the bulk of the sales
miss -- related to execution -- during the fourth quarter," Field
The market eventually came around to that view. The stock is
3% off its 52-week high.
Analysts expect earnings to rise 16% in fiscal Q4 on a 12%
A harvest that came as much as four or five weeks earlier than
normal also was part of Deere's difficulties. Some machines were
completed too late for harvest and were canceled.
Dry weather is expected to help Deere. The reduction in grain
supplies lifts prices, giving farmers more money for new
According to the National Climatic Data Center, the first 10
months of 2012 were the warmest on record for the contiguous
As of early November, the National Weather Service's Climate
Prediction Center said, "drought expansion and intensification"
Deere's quarterly dividend is 46 cents a share, more than
double what it was in mid-2007.