November 23, 2017

Deere & Co Posts Fifth Highest Earnings In History

Deere & Co stocks are soaring higher on Wednesday after the company shocked analysts with unexpectedly high earnings.  The fourth quarter results were largely due to improving machinery demand, an area the company had struggled with since 2014.  The company also raised it’s 2018 sales estimate by a whopping 19% resulting in an earnings projection of $2.6 billion if realized.

The main contributor to the sharp earnings increase was a 23% surge U.S. and Canadian net equipment sales during the fourth quarter.  Other divisions rose as much as 30%.  Net income attributable to the company rose 79 percent to $510.3 million or $1.57 per share in the fourth quarter, while total net sales rose 25.5 percent to $7.09 billion.

Analysts had expected fourth-quarter earnings of $1.47 per share and sales of $6.99 billion.  This is the fifth quarter in a row the company has outperformed expectations.

“John Deere has completed another successful year as markets for farm and construction equipment showed improvement and our actions to build a more durable business model yielded strong results,” said Samuel R. Allen, chairman and chief executive officer, adding that the year’s sales and earnings were the fifth-highest in company history. “We saw higher overall demand for our products with farm machinery sales in South America making especially strong gains and construction equipment sales rising sharply. At the same time, the company realized continued benefits from its broad product portfolio and agile cost structure. As a result, Deere has remained well-positioned to serve present customers while making investments aimed at driving growth and attracting additional customers in the future.”

Investments made or announced during the year included the acquisition of the Wirtgen Group, the
world’s leading manufacturer of road construction equipment. The transaction is expected to be finalized next month. “Wirtgen will establish Deere as a substantially more prominent player in global construction equipment markets,” Allen said.

Tyson Building New Tennessee Plant; Kansas on Hold

Tyson Foods announced it will build a chicken-processing plant in western Tennessee. A Drovers’ report says the plant will be up and running by 2019 and will provide more than 1,500 new jobs. The $300 million plant will be built in the city of Humboldt. The company had already invested money in Tennesse as it announced an $84 million dollar expansion of its plant in Union City. Tyson chose Humboldt for its new site over several other locations in the state. A similar plant was proposed in Leavenworth County, Kansas, but public backlash over the plant kept the plan from getting any footing. There were three other locations discussed as potential replacement sites. Kansas Department of Agriculture officials issued a statement congratulating Tennessee on the announcement. “We look forward to continuing to work with Tyson as they further evaluate expansion of their poultry business unit growth opportunities,” says Heather Lansdowne, KDA Communications Director. Tyson officials say they are still interested in building a production plant in Kansas but those plans don’t look to be happening in the near future.

Peterson Likes Senate Tax Bill Better Than House Version

House Ag Committee ranking member Collin Peterson says the Senate tax bill is closer to something he can support than the House Bill. The Minnesota Democrat hopes changes will be made so he can support the conference report. Peterson tells the Hagstrom Report that he supports lowering corporate tax rates but not at the expense of raising taxes on individuals. He also supports raising the exemption on the estate tax but not eliminating it. He wants the provision allowing co-ops to pass along production and marketing cost tax breaks to their members to continue. The current House and Senate bills both eliminate the provision, known as Section 199. “Co-ops don’t pay income taxes and therefore, if this is taken out, the co-ops get nothing from this bill,” Peterson says. “Also, the provisions to eliminate or reduce the deduction for the state and local taxes are a problem and I’ve heard about it from my constituents.” He’s in favor of eliminating the individual insurance mandate under the Affordable Care Act but says that cutting it out will make passing a tax bill that much more difficult. The White House has said the Trump administration understands that particular provision may have to be taken out of the legislation to pass the bill.