Deere & Company
) have gone up since the completion of its acquisition of Paton,
Iowa-based Bauer Built Manufacturing Inc. on Sep 30. The bullish
sentiment is mostly based on expectation that the acquisition
will accelerate the growth of its planter business worldwide.
Deere had announced its intentions to acquire Bauer in early
September in order to expand its portfolio of agricultural
equipment and enhance its ability to serve larger farms in key
Since 2002, Bauer had manufactured John Deere and Bauer
co-branded planters under a design and manufacturing partnership
with Deere. The deal includes the designs, intellectual property,
inventory and equipment, along with Bauer's manufacturing
facility in Paton with a workforce of 150 people. Deere will
continue to manufacture the 44- to 120-foot ultra-wide DB Series
planters at the facility.
In the third quarter of fiscal 2013, Deere's worldwide total
sales increased 4% year over year to $10 billion, beating the
Zacks Consensus Estimate of $9.3 billion. Agriculture and Turf
equipment sales increased 8%, but were offset by an 11% dip in
Construction & Forestry.
Deere expects equipment sales to decrease around 5% year over
year for the fourth quarter of fiscal 2013. Agriculture and Turf
equipment sales is expected to grow 7% in fiscal 2013 aided by
higher commodity prices, strong farm incomes, global expansion
and new lines of advanced equipment.
Region-wise, Deere expects industry farm machinery sales in the
U.S. and Canada to increase 5% year over year in 2013. In Europe,
sales are projected to be down 5% due to continued deterioration
in the overall economy and a poor harvest in the U.K. last
Global sales for Construction & Forestry equipment may
fall about 8%, reflecting a cautious outlook for the U.S.
economic growth. Global forestry sales are expected to be higher
as improved U.S. demand more than offset weakness in European
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Deere's growth in the US is mostly expected to stem from Brazil.
However, the IMF has recently reduced its outlook for Brazil's
economic growth by cutting its GDP growth rate for 2013 and
2014. This remains a concern for Deere. Furthermore, the
uncertainty in the construction sector will weigh on its results.
Deere currently retains a Zacks Rank #3 (Hold). Other stocks in
the same industry that are worth a look include
Alamo Group, Inc.
), which retain a Zacks Rank #1 (Strong Buy) and
Lonking Holdings Ltd.
) which carries a Zacks Rank #2 (Buy).