Deere & Company (DE)’s Weak Earnings a Reflection of Struggling Grain Complex

Deere & Company (NYSE:DE) announced their third quarter earnings today, for the period ending July 31, and they were not favorable. The agricultural equipment company’s earnings fell 15 percent from a year ago, and the company had to adjust their year end earnings downward as a result.

Deere & Company (NYSE:DE)

Jim Cramer, of CNBC’s ‘Squawk on the Street’ chalked Deere & Company (NYSE:DE)’s woes up to the fact that it’s intrinsically tied to a grain complex that is struggling in the absence of higher ethanol mandates.

“Deere is just a serial disappointer. AGCO had come on Mad Money recently and said ‘listen, this is just a terrible market for ag equipment’. Now the price of land is not down, which usually puts a floor underneath Deere,  so I don’t think Deere is going to implode, but look, Deere is still a function of the grain complex, and the grain complex is no longer boosted by ethanol,” Cramer exclaimed.

Deere & Company (NYSE:DE)’s earnings of $850.7 million, or $2.33 per share, actually beat the estimates of analysts polled by Factset earlier this year, who anticipated just $2.20 per share in earnings. Either way, they were well off the year ago period’s earnings of $996.5 million, or $2.56 per share. Overall, the revenue of Deere & Company (NYSE:DE) from farm equipment sales for the quarter shrank to $8.72 billion, from $9.32 billion a year ago.

The much weaker demand for farm equipment despite the gradually improving economy can be directly blamed on the leveling off of the farm sector after furious activity in corn farming throughout much of the past decade, thanks to generous ethanol subsidies that totalled as much as $6 billion annually.

While equipment sales at Deere & Company (NYSE:DE) were down by 8% in Canada and the U.S during the quarter, construction and forestry sales were up a strong 19%, which could herald a new growth market for Deere.

Disclosure: none

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!