Agricultural, forestry and construction equipment manufacturer
Deere & Company
) will report its retail sales for September this week following
the monthly announcement of industry sales by the Association of
Equipment Manufacturers ("AEM").
As is the practice, Deere will provide its comments about the AEM
data and other information regarding retail sales of the
company's farm machinery, selected turf & utility equipment,
and construction equipment.
In early September, Deere announced mixed retail sales for
August. Sales of row crop tractors and combines
outperformed the industry, while sales for utility tractors and
four-wheel drive failed to match the industry performance.
Deere's reported inventory levels were lower than the industry
for all its product segments.
Deere's performance was better than that of
). Sales growth for the construction and mining equipment
continued to be in the red with a decline of 10% in August, the
ninth consecutive month of decline.
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 as well as the company's
guidance of sales growth of about 3%. Farm equipment
Alamo Group Inc.
) also delivered record results, beating expectations, reflecting
steady demand for its agricultural equipment.
For the fourth quarter of fiscal 2013, Deere expects equipment
sales to decrease around 5% year over year. Deere had witnessed
strong sales in the fourth-quarter of fiscal 2012 as factories
were running full steam to meet customer orders. This puts the
fourth quarter of fiscal 2013 against a tough comparison.
However, despite this the company expects a third consecutive
year of record results.
Before the federal government shut down, manufacturing
unexpectedly picked up in September. The Institute for Supply
Management's ("ISM") factory index rose to 56.2 from 55.7 a month
earlier - the strongest growth exhibited since Apr 2011.
As per the ISM, manufacturing had contracted in May, as
government spending cuts and weaker global demand caused
headwinds for the U.S. companies. However, the manufacturing
index has remained above 50 (which indicates expansion) every
month since then, kindling hopes in the manufacturing sector.
The recovery in housing is also spurring demand for construction
machinery. This suggests positive September results for Deere.
Furthermore, Deere's sales will continue to benefit from
investment in new products and capacity as well as continuing
strong demand for agricultural machinery.
However, continuing weakness in European markets, soft
conditions in the U.K. farm sector and rising competition are
expected to remain headwinds. Deere currently retains a Zacks
Rank #3 (Hold).
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