Nothing Runs Like a Deere & Company (DE): CNH Global NV (CNH), AGCO Corporation (AGCO)

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Deere & Company (NYSE:DE) reported first quarter earnings on Feb. 13 and they widely beat analyst expectations. Earnings per share came in at $1.65, beating the estimates of $1.40 by 17.9%, and was a 26.9% increase year-over-year. Deere increased its outlook for 2013, although it was an increase that was lower-than-expected because of the drought and corn issues in the Midwest.

Deere & Company (NYSE:DE)

Company Overview

The world’s largest agricultural and farming equipment maker also manufactures forestry, construction, commercial, and residential equipment. Deere & Company (NYSE:DE) is known for their tractors, harvesters, and riding lawn mowers, but they are more than just an equipment maker in the Midwest, they symbolize a way of life. Deere equipment helps these people make a living and the company does everything it can to help make it easier. Even their color is beloved and showed by people wearing the shirts, hats, and singing the John Deere Green song. This green is to strong equipment as Tiffany Blue is to fine jewelry.

Record Setting Year

2012 was a record setting year for Deere. They set their all time highs for revenue and income, as well as showed positive growth in most every aspect of their business. Here are some of the highlights for the year:

Net income increased 9.5% to $3.065 billion
Earnings per share increased 15.1% to $7.63
Net sales and revenues increased 13% to $36.157 billion
Operating Profit increased 11.9% to $5.109 billion
Net sales of equipment operations increased 14%
Net sales in the North America increased 20%
Net sales outside of North America increased 5%

Market Outlook

There are several positives that will drive Deere & Company (NYSE:DE) higher this year. In their 2012 annual report, they stated the following outlook for 2013:

Equipment sales are projected to increase 10% in the first quarter
Equipment sales are expected to grow 5% for the fiscal year
Net income is expected to rise to around $3.2 billion

Corn production dropped 13% to a 6 year low in 2012 after one of the worst droughts the Midwest had ever seen. This caused a major spike in prices and will keep supplies tight in 2013. With this drop in supply, there will not be as high of a demand for Deere’s products as they would like. If farmers are having trouble with their crops and harvesting, there is no way they will look to invest in new equipment. Keep an eye on corn as well as other crops, because they will have a direct effect on Deere’s bottom line.

Earnings and Projections

Current Stock Snapshot

Before the market open on March 11, Deere is trading at $90.88. With trailing twelve month earnings of $7.99 per share, they are trading at a multiple of just 11.37. Over the last 5 years, their average price-to-earnings ratio has been 15.41, which would price this stock around $123. With earnings continuing to grow, this company could rise to $150 by 2015.

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