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Deere Invests to Enhance Seed Plant

DE AGCO

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Deere & Company (DE - Analyst Report) announced that it will invest $58 million to enhance operations at Moline, Illinois seeding plant, which is currently engaged in the manufacturing of planting equipment.

The plant manufactured its first planting equipment in 1877 and has been operational since 1879. The plant currently employs around 800 people. However, the investment will not have a material impact on total employment. The investment is in addition to a new factory master plan aimed at increasing efficiency and quality. Improvement will come in the form of a new paint system and increased usage of automation and robotics. 
 
Deere’s fourth quarter fiscal 2012 earnings came in at $1.75 per share compared with $1.62 per share in the prior-year quarter. Deere’s worldwide total sales increased 14% year over year to $9.79 billion, beating the Zacks Consensus Estimate of $8.84 billion.
 
The Agriculture & Turf segment’s sales increased 16% to $7.39 billion, attributable to higher shipment volumes and improved price realization, partially offset by a negative currency translation. Operating profit of the segment improved 7% to $931 million, attributable to higher shipment and improved price realization, partially offset by unfavorable effects of foreign currency exchange.
 
Deere expects equipment sales to grow around 10% in the first quarter of fiscal 2013 and 5% for the full year. Net income is projected at $3.2 billion for fiscal 2013. Segment wise, Deere expects worldwide sales of Agriculture and Turf equipment to grow 4% in fiscal 2013. Higher commodity prices and strong farm incomes are expected boost demand for farm machinery during the year. Furthermore, Deere’s sales are expected to benefit from global expansion and lines of advanced new equipment.
 
Region wise, Deere expects industry farm-machinery sales in the U.S. and Canada to remain flat year over year in 2013. In Europe, sales are projected to be down 5% due to continuing deterioration in the overall economy. Sales in the Commonwealth of Independent States are expected to witness modest growth.
 
The company has invested to expand its presence in both domestic and international market, and has been building capacity in China, India, and Brazil and continuously launched new products. Given the increased global demand for food, shelter and infrastructure, we believe that the long-term outlook for Deere remains strong. 
 
Furthermore, recent figures reveal that U.S. residential construction is finally stabilizing and is on the road to a much-awaited recovery. This, in turn, will improve demand for Deere’s construction equipment going forward. However, continued weakness in the European markets remains a concern.
 
Deere retains a Zacks #3 Rank (short-term Hold rating). Illinois-based Deere, is engaged in the production and distribution of agricultural and forestry equipment, construction equipment and engines worldwide. The company sells products in the U.S. and Canada through branch offices as well as through distributors and dealers for the resale of products internationally. Deere competes with companies like AGCO Corporation (AGCO - Analyst Report) and CNH Global NV .

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