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Deere Predicts Bumper Crop of Profit
02/17/2011 4:24 pm EST
Good times for the world’s farmers and for Deere & Company (NYSE: DE) will continue, Deere said in its fiscal first-quarter 2011 earnings report released February 16 before the New York stock markets opened.
The company’s earnings reports get scrutinized as much for Deere’s projections on farm prices as they do for the company’s own financial results. And Deere’s news for farmers was all good. The company raised its forecast for the 2011-2012 price of corn to $4.90 a bushel from its earlier forecast of $4.35 and its forecast for wheat to $6.35 a bushel from $5.50.
Not that the company’s own results were anything shabby. For the just-completed quarter, Deere announced earnings of $1.20 a share, better than the 99 cents a share expected by Wall Street analysts. In last year’s first quarter, the company earned 57 cents a share. Sales climbed to $6.12 billion, up 27% from the first quarter of fiscal 2010.
Deere gets about 65% of its sales from the United States and Canada, so when the company raised guidance for 2011, it was itself a vote for continued good times in the farm belt. For the full fiscal year, which ends in October 2011, the company now projects that sales will climb by 18% to 20%. That’s a big increase from its previous guidance of 10% to 12% for the fiscal year. Net income will climb to $2.5 billion. That’s substantially above Wall Street projections of $2.36 billion for the fiscal year. The company had previously guided to net income of $2.1 billion.
Deere’s results for the quarter include a huge improvement in the company’s construction and forestry equipment business. Sales in that business climbed by 81% from the first quarter of fiscal 2010. Operating profit of $88 million was in stark contrast to the operating loss of $37 million a year ago.
Deere’s earnings have pushed up not just the company’s own shares (up 3.4% as of 9:45 am in New York) but those of fertilizer producers (Agrium (NYSE: AGU) is up 1.6%) and construction equipment makers (Caterpillar (NYSE: CAT) is up 1%).
Deere has been a member of my Jubak Picks 50 long-term portfolio since its beginning in December 2008.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this post. The fund did own shares of Agrium and Deere as of the end of December. (I will have the January portfolio holdings posted this week.) For a full list of the stocks in the fund as of the end of December see the fund’s portfolio here.
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