The Ambiguity of Deere (NYSE:DE) Stocks


The analysts might have had it wrong for Deere & Company’s (NYSE:DE)’s Q4 earnings predictions. However, the overview of the company’s performance did point towards weaker analysis. The company is being seen as a profitable company that can yield profits on long term basis. This is due to the fact that prices of crop are not forever going to stay low and might ounce back in the near future.

A brief in to the Q4 results is as under:

  • Net sales in Q4 decreased 7% to $8.04 billion, as opposed to the analysts’ prediction of $7.75 billion
  • Diluted EPS in Q4 fell 13% to $1.83, against analyst projection of $1.57
  • The full fiscal year net income worth $3.16 billion against $3.1 billion internal guidance

It does look good so far. However, the guidance figures are not too impressive. Investors who expected better bounce back yield in Deere (NYSE:DE) have been quite disappointed with the net income guidance in 2015, projected at $1.9 billion. In addition to this, the net sales are also expected to undergo a dip of 15% in the year 2015. The company might not be revealing figures that are close to precision.

The company crop prices are not looking too good for the current fiscal. Even with forestry and construction segment, Deere (NYSE:DE) still remains dependent on its crop yields.  According to statistics, the profit yield due to forestry and construction segment was 71%.

The company however, continues to predict discouraging figures in terms of future prospects, with significant weakness in prices for wheat and corn. The soybean and cotton have met the targeted forecast for fiscal Q4.

The company CEO, Samuel Allen has disclosed that the sales have actually gone down. However, he has promised that the 2015 will be profitable, even with decline in sales for current fiscal year.

According to the 2015 guidance predicted by Deere (NYSE:DE), the trends seem to continue for the next year as well. The net sales are projected to go down 15%, while the net income is forecasted to dip to $1.9 billion from the previous $3.16 billion. The turf and agriculture sector net sales are expected to go down 20%, however, the forestry and construction net sales are expected to go up by 5%.

This shouldn’t be met with much surprise as lower trends have been observed in the industry. The farming equipment company, ACGO Corporation (NYSE:AGCO) has also decreased its annual projections in October. The company has targeted to decrease its accounts to level with the current demand in the market.

In addition, an overall decrease in crop price has been translated in to the company projections that are quite similar to the forecasts the other contenders in the market have revealed. It is a fact that Deere (NYSE:DE) is seen as a cyclical company in its ventures, and it is too soon to say what will be the end result, unless the last phase of the current cycle is reached. Things might get better eventually for the market, but first they will get worst.