Deere & CompanyDE has acquired a majority stake in Hagie Manufacturing, making its foray into the growing high-clearance spraying equipment market. Hagie Manufacturing, which is a market leader in high-clearance sprayers in the U.S., will continue producing sprayers under the Hagie brand from its current Clarion, IO location.
High-clearance sprayers allow farmers to spray fields with fertilizers and pesticides later in the growing season. Sales and service for Hagie equipment will be integrated into Deere's global distribution channel over the next 15 months. Hagie products will now have access to Deere's huge customer base. The deal will provide Deere a broader range of sprayer options and integrate Deere's precision technology into the Hagie equipment. This will subsequently benefit its customers by cutting costs and improving yields.
Despite the currently weak demand for farm equipment, Deere and other agriculture equipment manufacturers have continued to invest in acquisitions, and research and development given their positive long-term outlook on the sector. Deere has announced hundreds of layoffs due to lackluster earnings results. The company reported a decline in both its top and bottom line for the first quarter of fiscal 2016 (ended Jan 31, 2016) owing to sluggish growth in global markets for farm and construction equipment.
Moreover, Deere provided a bearish outlook for fiscal 2016. It expects equipment sales to drop around 8% year over year in the second quarter of fiscal 2016 and 10% for the full fiscal.
The company foresees global sales for Construction & Forestry equipment to tank about 11% in fiscal 2016. The decline reflects the impact of soft conditions in the North American energy sector, as well as lower sales outside the U.S. and Canada. It also expects Agriculture and Turf equipment sales to slump 10% for the fiscal.
However, Deere expects to record solid profitability over the long term on the back of increased global demand for food, shelter and infrastructure. But, as of now, weak conditions in the energy and agricultural sectors, and sluggish economic growth outside the U.S. remain headwinds for the company.
Deere currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in this sector are Briggs & Stratton Corporation BGG , Astec Industries, Inc. ASTE and The Toro Company TTC . All of these stocks have a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
ASTEC INDS INC (ASTE): Free Stock Analysis Report
DEERE & CO (DE): Free Stock Analysis Report
BRIGGS & STRATT (BGG): Free Stock Analysis Report
TORO CO (TTC): Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
