Shares of agricultural, forestry and construction equipment
Deere & Company
) gained 2% since its announcement of mixed retail sales for
November on Dec 10. Sales in utility and row crop tractors
outperformed the industry, while sales for four-wheel drive
tractors and combines failed to match the industry performance.
Deere's reported inventory levels were lower than the industry
for all its product segments.
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November Retail Sales Performance in Detail
In the agriculture and turf segment, Deere's U.S. and Canada
utility tractor sales growth went up by single digits in
November, on contrary to the industry-wide sales decline of 3%.
Deere's inventory was reported to be lower than the industry-wide
inventory of utility tractors, which stood at 50% of the previous
12 months' sales.
Sales of row crop tractor went up by double digits, outperforming
the industry growth rate of 7% during the month. The industry
inventory of row crop tractors were 33% of the previous 12
months' sales and Deere's inventory of row crop tractors was
lower than the industry inventory.
Sales of four-wheel drive tractor sales decreased in single
digits in November, in stark contrast to the 2% growth witnessed
across the industry during the month. Deere's inventory for the
four-wheel drive tractor was lower than the industry inventory at
25% of the previous 12 months' sales.
Combine sales went up in double digits, but failed to match the
26% growth across the industry. Deere's inventory for the
combines was lower than the industry inventory at 17% of the
previous 12 months' sales.
Retail sales of selected turf and utility equipment were flat
year over year in November. In Europe, retail sales of tractors
were down in single digit, while combine sales were down by
double digits year over year. Coming to the Construction and
forestry segment, sales went up in single digits both on a "First
in Dirt" basis (retail sale of a new unit plus first use of a new
rental unit) and on a settlement basis (retail sale of a new unit
plus conversion of rental unit to a retail sale).
Deere's Q4 Sales Performance and Expectations
Deere's worldwide total sales decreased 3% year over year to
$9.45 billion, beating the Zacks Consensus Estimate of $8.8
billion. Agriculture and Turf equipment sales decreased 4%
and Construction & Forestry sales dipped 8%.
Deere expects equipment sales to decrease around 2% year over
year for the first quarter of fiscal 2014. For the full year, the
company continues to expect equipment sales to decline 3%.
Region-wise, Deere expects that industry farm machinery sales in
the U.S. and Canada will decline 5% to 10% year over year in
fiscal 2014. In Europe, sales are projected to be down 5% due to
continued deterioration in the overall economy, lower commodity
prices and farm incomes.
The company foresees global sales for Construction & Forestry
equipment to advance about 10%, partly because of the recovery in
the U.S. economy and an increase in housing starts.
Deere's performance was better than that of
). According to the last published data, sales growth for the
construction and mining equipment continued to be in the red with
a decline of 12% in October, the eleventh consecutive month of
Given the increased global demand for food, shelter and
infrastructure, we believe that the long-term outlook for Deere
remains strong. Even though U.S Departement of Agriculture
projects record net farm income for CY2013, farmer sentiment
regarding capital goods purchases is becoming more conservative
due to lower commodity prices. Deere will nevertheless benefit
from recovery in construction sector. However, continued weakness
in the European markets remains a concern.
Deere 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 currently holds a Zacks Rank #3 (Hold). Some better-ranked
stocks in the machinery-farming sector include
Alamo Group, Inc.
). While Kubota carries a Zacks Rank #1 (Strong Buy), Alamo holds
a Zacks Rank #2 (Buy).