April 26, 2019

DE – Market expectations are for Uniform ROA expansion, but management may be concerned about equipment demand, margins, and JDF offerings


  • Deere & Company (DE:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Earnings, with a 16.7x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management may be concerned about the sustainability of equipment demand, their agriculture and turf margin forecast, and their financing segment offerings
  • Specifically, management may lack confidence in their ability to manage airfreight and R&D costs, and in the sustainability of foot traffic and construction & forestry equipment demand. Furthermore, they may be concerned about seasonality, decreases in their agriculture and turf margin forecast, and weakness in large tractor and international market demand. Finally, they may be exaggerating equipment rental utilization rates and the balance of their financing portfolio, and may be overstating their financing segment’s ability to allow farmers to upgrade equipment.
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