Stock of the Day
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Deere (DE)
Deere's Profit Falls 27%
Deere & Company (DE: Charts, News, Offers), best known for its popular green and yellow John Deere brand, announced today that its profit for the quarter fell 27%. The farm equipment and tractor manufacturer watched its net income slip from $575.2 million a year ago to $420 million for the quarter. This earnings report also marks the second consecutive quarter that Deere has posted a decline in sales. Despite its recent dip in performance, the wheels have not completely fallen off this tractor company. After all, Deere did manage to record an overall profit for the quarter. However, why has Deere & Company's quarterly performance been down so much lately?
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| Stock Analysis |
A drop in sales will cut into any company's profit margin; some more than others, just ask Deere. The iconic tractor company has been dealing with declining sales and profit for a few months now, but it has reached an all time low this quarter. Deere & Co.'s net sales have decreased 24% for the quarter and are on pace for the largest single-year sales decline in at least 50 years. The driving force behind Deere's sales plummet has been the recent housing market fallout, which has killed the demand for Deere's construction machinery. In addition, the global recession has slowed down international sales by creating restricted credit opportunities and lower farm incomes for potential Deere customers. The farm equipment manufacturer has done its best to combat declining sales by raising equipment prices and cutting expenses, but it has not been enough. Deere has even let go nearly 800 employees in an attempt to manage expenses.
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Deere has been in a slump these past few quarters, and is working vigorously to get out of it. Deere & Company has implemented a tighter cost management strategy and product price increases to help improve its profit performance. However, while these techniques may help at the moment, Deere recognizes that they are only short-term fixes. For the long run, Deere is concentrating on its positioning in developing markets. Deere is very optimistic about the ethanol production industry and international farming market. Deere & Company believes that it has the tools and technology necessary to be very profitable in these emerging opportunities. Although ethanol production and global farming activity has been relatively flat recently, Deere is hoping that it has enough gas in the tank to harvest these markets once they have fully grown.
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Discussions About Deere:
A Look at Deere & Co. Ahead of Earnings - Commentary analysis of Deere's stock market performance after its earnings release.
Deere Reports Third-Quarter Earnings Of $420 Million - Official Deere & Company earnings report posting.
Deere's New 2010 Product Line - A sneak peak at Deere's upcoming new equipment releases.
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