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Stock of the Day
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Deere & Co. (DE)
Deere & Co. Posts First Quarterly Loss in Over 7 Years
Deere & Co. is the largest manufacturer of agricultural equipment in the word, and as such, is often looked at as an indicator of the performance of the agricultural sector. And indeed, the difficult economic situation has taken its toll on farmers, as well as Deere. For the fourth quarter this year, Deere's profit and revenue fell significantly. What are the major reasons for Deere's poor performance, and how does the company expect to perform next year?
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The economic situation has created difficult times for farmers. Fuel costs are extremely high, as are other critical farming items such as fertilizer, and the prices paid for crops is much lower than in recent years. As a result, the demand for farming equipment such as tractors has decreased, simply due to the financial inability to purchase the equipment. This had a strong effect on Deere's fourth quarter performance. Despite efforts by Deere's new CEO Samuel Allen to decrease production, reduce costs, and cut jobs, the company still struggled. Last year, the company reported a fourth quarter profit of $345 million, or 81 cents per share. This year, however, the company reported a loss of $222.8 million, or 53 cents per share. This is the first quarterly net loss the company has reported in almost eight years.
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A good portion of the company's loss came from one time charges, totaling approximately $322 million, which were partly used for the voluntary separation packages. Even without these one times charges, Deere would have only had a profit of 23 cents per share, still a solid decrease from the year before. Revenue fell as well, dropping 28% from $7.4 billion to $5.33 billion. Sales fell 26% in the United States and Canada, and averaged a 35% loss everywhere else. The only area which is currently performing well is South America, which Deere predicted could see a sales increase between 10-15% next year.
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CEO Allen issued a cautious outlook for 2010. Allen forecasted yearly earnings of $900 million, or $2.14 per share. The company predicts that sales will continue to fall through the first quarter, possibly dropping another 10%, but will hopefully rise later in the year. Analysts were more optimistic, forecasting earnings of $1.2 billion, or $2.76 per share; Allen's forecast is expected to be conservative, because this is his first yearly forecast as CEO of the company. Everyone expects the road ahead to be bumpy, as agriculture has a long recovery ahead, but the company is hopeful that with gradual, incremental improvements, they can get back on track.
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Deere & Co. Commentary:
Deere to Recall 452 Workers at Iowa Plant - Just a couple of months after laying off over 500 works from an Iowa plant, Deere has decided to bring many of them back to start working on 2010 models.
Deere names new chief executive - The announcement of Deere's new CEO Samuel Allen, who took office in August 2009.
Deere says it's prepared to expand in Russia - Since Deere is struggling in the United States, the company is looking for opportunities overseas, and has decided to expand the company into Russia.
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More Stocks in the News:
Toyota to recall 3.8M vehicles to reshape and replace pedals - Toyota Motors (TM: Charts, News, Offers) has announced a recall of almost 4 million vehicles, and confirmed that they will not just be swapping floor mats, but actually fixing the accelerator pedals.
Microsoft says cost-cutting CFO to step down - The CFO of Microsoft (MSFT: Charts, News, Offers) is leaving, after having helped the company cut expenses.
Tiffany raises outlook as 3Q profit comes in ahead - Even during a recession, luxury retailer Tiffany & Co. (TIF: Charts, News, Offers) managed to report only a 1% decrease in profit, and an increased yearly forecast.
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Profile |
Click here to view a detailed profile of Deere & Co..
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