Deere & Company Equity Research

You have to hand it to Deere & Company's management. Not much has gone right from an end-market perspective in the last few years, with US farm cash receipts declining since 2014 as prices of key agricultural crops (ex. corn, wheat, and soybean) continue to fall. The end result is that farmers are declining to buy new equipment -- particularly the kind of high-margin large agricultural machinery that Deere thrives on -- and the company's sales have slumped.

However, Deere's stock is up nearly 40% on the year as management continues to defy the doubters. Let's analyze the key takeaways from the recent earnings report in order to see what's been going on and why the company looks set for better days.

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Is Deere & Company a Good Investment?

Deere & Company's end markets (agricultural and construction machinery) haven't improved in 2016, and its EPS is down 16% in the first nine months of its fiscal 2016. However, the stock is up 13% year to date, having outperformed the S&P 500 and peers like AGCO Corporation  and CNH Industrial N.V. Most of the move took place immediately after the company trumped estimates with its third-quarter results.

So, does this mean the company is now through the worst, and the stock can take off from here?

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Is Deere & Company Stock a Buy?

As Deere & Company's  fiscal year 2016 has progressed, its management has lowered full-year earnings and cash flow forecasts. Moreover, competitors such as Caterpillar Inc.  in construction machinery and AGCO Corporation  are both seeing weakening conditions. That said, all of the stocks mentioned are outperforming the S&P 500 on a year-to-date basis as I write.
What's going on with Deere in 2016, and does it's poor relative performance mean it's time to buy the stock?

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Deere & Company Faces Risk in 2016

Deere & Company's second-quarter earnings were a mixed bag. The company is executing well, but difficult end markets led to a full-year guidance reduction. Let's review the pressures building up on Deere and what management said on the earnings call to help alleviate investors' fears about 2016.

The bear case for Deere Investor concerns include:

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Deere & Company Stocks Faces Risk in 2016

Deere & Company is a great business with good long-term prospects, but it's facing a significant amount of risk in its near-term prospects. Given that its upside potential is reliant on crop prices rising, it makes more sense to buy an ETF in a crop like corn or wheat than carry the near-term risk in Deere stock. Here's why.

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Deere & Company (DE) Sales Figures Give Little Cheer

The latest retail sales and dealer inventory figures from Deere & Company  gave little cause for optimism. Consequently, the near-term risk in the stock is increasing. Longer term, Deere may be an attractive stock -- its prospects can turn around quickly if crop prices start to rise -- but investors are going to have to stomach the potential downside from a number of challenges in 2016. Let's take a quick look at the latest update from Deere.

DEERE NEEDS TO SHIFT ITS LARGE AGRICULTURAL MACHINERY INVENTORY. IMAGE SOURCE: DEERE & COMPANY.

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Time to Buy Agricultural Machinery Stocks For 2016?

Titan Machinery, Inc.'s (NASDAQ:TITN) third-quarter results delivered the latest tale of woe for the agricultural machinery sector, and the market promptly reacted by sending the stock down nearly 25% in the days following the earnings report. Titan's troubles matter to the sector because it sells and rents agricultural and industrial equipment to CNH Industrial (NYSE:CNHI). As CNH goes, so do rivals Deere & Company (NYSE:DE) and AGCO Corporation (NYSE:AGCO). That said, let's take a look at Titan's earnings and the outlook for the rest of the sector.

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5 Key Takeaways From Deere & Company (DE) Earnings

Deere & Company's recent results beat analyst expectations, and the initial uptick in the stock price served notice that despite forecasts for another year of falling sales, Deere still has upside potential. In this context, let's look at five things management wants you to know from its fourth-quarter results.

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Deere & Company Company Analysis

Deere & Company's  recent results were warmly received by a stock market that's hoping the company can engineer a turnaround in fiscal year 2016. However, the earnings beat was more about cost cutting than any improvement in the agriculture machinery market. In reality, Deere still faces declining end markets in 2016. On a brighter note, the stock gives you upside exposure to any increase in crop prices, and for that reason alone it's attractive within a balanced portfolio. Let's look at what you need to know before buying or selling a position.

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Using Behavioral Finance in Investing

Have you ever wondered how you can make money from behavioral finance? It's a much-discussed topic that often leaves investors floundering for something tangible to invest in. Well, wonder no further, because I have three examples of stocks whose prospects are best understood using a simple understanding of the so-called wealth effect. So let's look at why Boeing , Deere & Company , and The Home Depot are interesting for behavioral-finance enthusiasts

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The Bullish Case for Deere & Company Stock

It's been a difficult year for investors in the agricultural machinery sector, as key crop prices have continued to fall, putting pressure on farmers' incomes and willingness to spend on new machinery. Consequently, the leading players in the industry, including Deere & Company have underperformed the broader market. However, a recent report from PricewaterhouseCoopers titled "China's Agricultural Challenges" helps shed light on the long-term bullish case for buying agribusiness stocks. Let's look at the key arguments.


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Deere & Company Faces Two Big Near Term Risks

In a previous article, I looked at the current trends within Deere & Company's trading environment and concluded that the near-term risk was rising, even if the long-term case for the stock was still intact. For the benefit of readers looking for a deeper outline of the near-term risks, I've a created a graphical depiction below of what these rising risks are.

Let's take a closer look at what's going on.


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Deere's Management Speaks

The best-case scenario for investors in Deere & Company (NYSE:DE) is that crop prices rise, leading to an increase in farmers' incomes and ultimately a pickup in spending on large agricultural machinery. However, until that happens, the company will have to weather the storm of declining sales and weakening economic conditions within emerging markets. The question now is: How is the company adjusting to weakening conditions? Here is a look at five things you need to know about Deere's current trends.


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Can Deere & Company Stock Bounce Back?

Now that the dust has settled on Deere & Company's (NYSE:DE) earnings, it's time to take a closer look at the ongoing trends in its business. The stock has, superficially at least, some very attractive qualities.

The food industry is relatively noncyclically aligned and offers investors the potential to generate positive returns irrespective of where the economy is headed. Meanwhile, Deere investors will be hoping that 2015 sees a trough in its earnings. With that said, the company's third-quarter earnings and guidance were disappointing, and there is no sign that Deere's difficult end markets are picking up just yet.

So where does this leave the case for buying stock in Deere?


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Best Stocks in Agriculture

Are you looking to buy into the idea that the agricultural sector is going to bottom out this year? If so, you would be in good company, because Warren Buffett has been buying stock in agricultural machinery giant Deere & Co. (NYSE:DE). But is that the best stock for individual investors? Which stock in the sector should you prefer, and why? Let's look at the leading candidates in the agricultural machinery sector and some of their key metrics for 2015 and 2016.


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Is Deere & Company a Buy?

The recent second-quarter earnings from Deere & Company (NYSE:DE) helped the stock to outperform the S&P 500 on a year-to-date basis. The stock has attracted a lot of attention in 2015, not least from the news that Warren Buffett has been buying it for Berkshire Hathaway.

How did the recent results reflect upon the company's prospects in 2015? Let's take a look at four key conclusions.


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Caterpillar (CAT) or Deere & Company (DE) for 2015?

Ask any investor or hedge-fund manager what his favorite stock pairs are and Caterpillar (NYSE:CAT) and Deere & Company (NYSE:DE) are likely to feature near the top of the list. The two are oft discussed in the same breath as their investment propositions are believed to have had much in common during the last decade. However, on closer inspection the two stocks actually have notably different drivers. Let's take a look at them and, in doing so, assess what will guide their stock performance in 2015.

CAT data by YCharts

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Why Warren Buffett Bought More Stock in Deere & Company (DE)

Warren Buffett's Berkshire Hathaway Inc. increased its stake in Deere & Company (NYSE:DE)in the fourth-quarter of 2014, and he subsequently affirmed that he, and another manager, had been buying the stock for the investment firm. The buying has all the hallmarks of the kind of move on which he has built his career. The maker of tractors and other machines is an American icon, operating with a strong competitive moat, in a industry that -- as long as Homo sapiens require food -- isn't going to disappear. Case closed? Should you just follow the sage of Omaha into the stock and reap the benefits for years to come?


Before you rush in, let's look at why Buffett might have bought the stock, and what will move shares going forward.



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Deere & Company (DE) Earnings Analysis

Following the news that Warren Buffett has added to his stake in Deere & Company (NYSE:DE), it's highly likely that large numbers of Buffett followers will be excited to look at the company's first-quarter earnings. In short, there were more negatives than pluses, particularly on the headline numbers.



Let's take a closer look at the numbers and underlying trends from the first quarter.


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Deere & Company Estimates

Investors in farming machinery giant Deere & Company (NYSE: DE  ) will be interested in the latest crop production and price forecasts from the United States Department of Agriculture. Let's dig into the numbers from the USDA crop production report and, in doing so, compare its forecasts with Deere & Company's expectations. Might Deere's guidance for 2015 have been conservative?


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