Can Deere and Company Build on the Great Quarter?DE) has been facing trouble throughout the past nine quarters mainly because farmers have either cut back or delayed new-equipment expenditure amid a slump in grain prices, comprising corn.
Despite the enduring influence of the worldwide farm recession, as well as difficult situations in the construction equipment sector, Deere and Company unexpectedly reported robust quarterly results. In the most recent quarter, the company reported earnings per share of $1.55, $0.61 higher than the estimates. However, the company failed to meet the revenue estimates by $230 million.
Deere and Company’s businesses remained lucrative for the quarter, and operating profit for Ag and Turf segment and for the equipment businesses entirely was more than previous year’s levels even though sales moved down approximately $1 billion.
As a matter of fact, the company has been, and is still is, experiencing a major decline mainly because of endured low commodity prices.
However, in the long run, it is likely that crop prices would start to rise in 2018, and this will certainly push the stock upward.
Apart from this, the company offers more than 3 percent dividend, and has no plans to cut its dividend anytime soon.
Image by Gaertringen / Pixabay
At present stage, purchasers have the option of purchasing new equipment, buying second hand equipment or swapping with a competitor. Though Deere and Company’s distribution network is deep dyed, it is challenging for a buyer to negotiate a better deal.
For a loyal purchaser, it is not easy to shift from Deere and Company‘s products mainly because the company produces their own products and many of the inputs are raw materials. The company holds a robust position in the market where they have the prospective of many suppliers about the mainstream of their inputs and are not at any one supplier’s mercy.
Deere and Company jumped 13% last week on the back of strong earnings and raised outlook. Despite decline in several of its key segments, the company’s operating margins increased, which is a good sign for long-term investors. Although Deere and Company is now trading close to its 52-week highs despite reporting a year over year revenue decline, I think the stock has room to run higher. Due to the reasons mentioned above, I am bullish on Deere and Company and would recommend buying the stock.
Published on Aug 23, 2016By Akshansh Gandhi