Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
It has been a mixed bag out of the agricultural space these past few months. Many of the equipment makers have soared, while the fertilizer group has been more hit and miss. Deere & Company falls into the former camp, and while it has been ‘resting’ of late, consolidating a big move in the early weeks of 2012, it is one of the “go to” cyclical names for institutional money to pile into when the time is right. Deere announced a solid earnings beat this morning but like many companies expectations have been tepid. The year over year earnings growth was only 4%.
Via Reuters:
- Deere & Co reported a 4 percent rise in quarterly earnings on Wednesday as higher prices and growing demand for farming and construction machinery offset the rising cost of production, materials and meeting emissions regulations.
- The Moline, Illinois-based farm equipment maker posted fiscal first-quarter net income of $533 million, or $1.30 per share, compared with $513.7 million, or $1.20 per share, a year ago. Analysts had expected earnings of $1.24 a share.
- Sales for the quarter increased 11 percent to $6.77 billion, beating analyst expectations of $6.5 billion. Sales in the company’s core agriculture and turf division increased 8 percent during the quarter, while sales at its construction and forest machinery unit rose 22 percent.
- Deere Chief Executive Sam Allen said in a press release that the company “has started 2012 on a strong note” as conditions have remained favorable. As a result, Deere has increased its profit outlook for the year to $3.275 billion, up from a previous target of $3.2 billion.
- Deere had previously guided Wall Street to expect lower year-over-year earnings in the first quarter due to higher costs and lower combine production. But growing demand and price increases of 4 percent offset higher costs related to raw materials, emissions regulations and production.
- Deere maintained its forecast for 15 percent sales growth for the entirety of 2012, and said that sales will grow 15 percent in the second quarter.
- The farm-equipment industry’s sales in the U.S. and Canada will rise about 10 percent in fiscal 2012, the higher end of Deere’s previous forecast, as “overall conditions remain positive and demand continues to be strong, especially for high- horsepower equipment,” the company said.
- Industry-wide sales in the European Union and Western and Central Europe will be up as much as 5 percent on “favorable” conditions in the grain, livestock and dairy sectors, Deere said. Its previous forecast was for sales to be unchanged.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
