June 12, 2018

DE – Market expectations are for Uniform ROA to rebound to average levels, but management has concerns about margins, Wirtgen, and costs


 

  • Deere & Company (DE:USA)currently trades near historical averages relative to UAFRS-based (Uniform) Earnings, with a 16.3x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management has concerns about margins, Wirtgen, and costs
  • Specifically, management may lack confidence in their ability to meet increasing operating margin guidance in their C&F segment, and may have concerns about the amount of time it will take to realize synergies associated with their Wirtgen acquisition. Additionally, they may be downplaying concerns about the impact of global trade fears on farmers, and may be concerned about increasing cost of sales as a percentage of net sales
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