DE  Deere & Company

Exchange

NYSE

Sector

Capital Goods

Industry

Industrial Machinery/Components

Market Cap.

39.28B

Vuru Grade

46.01/100

Current Price

$122.79
+0.36 (+0.29%)

Growth Price

$114.44
Overvalued by 6.80%

Company Metrics

  • P/E 22.10
  • P/S 1.46
  • P/B 5.10
  • EPS 5.55
  • Cash ROIC 2.81%
  • Cash Ratio 0.25
  • Dividend 2.40 / 1.95 %
  • Avg. Vol. 2.29M
  • Shares 319.90M
  • Market Cap. 39.28B

Company Description

Deere & Company provides products and services primarily for agriculture and forestry worldwide. The company operates in three segments: Agriculture and Turf, Construction and Forestry, and Credit. The Agriculture and Turf segment manufactures and distributes a line of farm and turf equipment, and related service parts, which include large, medium, and utility tractors; loaders; combines, cotton, ... more


Download 10 Years of Financial Statements:
Income Statement   Balance Sheet   Cash Flow

News

Deere & Company Earnings Preview: The Iconic Tractor Manufacturer Reports Tomorrow
Forbes - May 18, 2017
Since fiscal 2014, Deere & Company management has cited weakness in the global farm economy as the primary reason for lower sales and earnings.
Deere raises 2017 forecast on strong farm equipment demand
Reuters - May 19, 2017
Deere & Co (DE.N) raised its full-year sales and profit forecast for the second time, as demand improves for its farm and construction equipment, particularly in South America, sending its shares to a record high of $122.22.
Deere beats across the board and raises its profit forecast - Business Insider
Deere cautiously upbeat on South America ag market despite unfolding Brazil crisis - CNBC
Deere & Company (DE) on Q2 2017 Results - Earnings Call Transcript
Seeking Alpha - May 19, 2017
Good morning and welcome to Deere & Company Second Quarter Earnings Conference Call. Your lines have been placed on listen-only until the question-and-answer session of today's conference.
Deere earnings rebound, up 62 percent
Waterloo Cedar Falls Courier - May 19, 2017
For the quarter ending April 30, Deere posted earnings of $802.4 million or $2.49 per share, compared with $495.5 million or $1.56 per share for the same period a year ago.
Deere & Company second quarter profits show gain
KWQC-TV6 - May 19, 2017
For the first six months of the year, net income attributable to Deere & Company was $996.2 million, or $3.10 per share, compared with $749.8 million, or $2.36 per share, last year.
Deere & Company (DE) Q2 Earnings & Sales Beat Estimates
Yahoo Finance - May 19, 2017
Deere & Company DE is the world's leading manufacturer of agricultural machinery with a market capitalization of $35.9 billion.
Checking the Overall Picture for Deere & Company (DE) - StockNewsJournal
6 Reasons to Add Deere & Company Stock (DE) to Your Portfolio Now - Investorplace.com
Follow Buffett - Or Keep Deere?
Seeking Alpha - May 22, 2017
Deere's second quarter was pretty good. Company has good operating leverage, can turn small sales increases into big earnings growth.
Buy Or Sell John Deere Stock Today?
Seeking Alpha - May 18, 2017
That's not a good sign. John Deere's debt levels should be lower. ✓ Free Cash Flow per Share Growth: John Deere's FCF has been higher than that of its competitors over the last year. That's good for investors. In general, if a company is growing its ...
As Deere Doubles Growth View, 3 Emerging Markets Are Key - Investor's Business Daily
Should You Buy Deere & Company (DE) Ahead of Earnings?
Nasdaq - May 17, 2017
That is because Deere & Company is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat.
Deere emphasizes importance of precision agriculture despite termination of ...
PR Newswire (press release) - May 1, 2017
MOLINE, Ill., May 1, 2017 /PRNewswire/ -- Deere & Company (NYSE: DE) announced it was informed by Monsanto Company that it has chosen to terminate a 2015 agreement for Deere to acquire the Precision Planting LLC business.
Monsanto scraps deal to sell Precision Planting to Deere - Reuters
Monsanto Drops Planting Unit Deal With Deere A Month Ahead Of DOJ Trial - Law360 (subscription)
Growth Rate Assumed by Market

We did a reverse valuation to calculate the growth rate the market is assuming for DE to be considered fairly valued at its current market price. It's useful to compare this to the growth rate we're assuming for the Growth Price.

Future Free Cash Flow Growth Rate

This is the annual growth rate we've applied to calculate DE's Free Cash Flow for the next 10 years. To calculate it, we looked at several time periods of the last 10 years. Feel free to adjust it, but we limit the initial growth rate to 20% and slow it down over the years. Otherwise, long-term sustainability issues come into play.

Discount Rate

The discount rate is the annual rate of return an investor requires to take the risk of investing in a single stock. To account for that risk, this should be above 8-10%, as this is the avg. annual rate of return for the S&P500 over the past 100 years.

$122.79 Current Price

$114.44 Growth Price (DCF)

Overvalued by 6.80%


Growth Rate Assumed by Market: 12.18%


Future Free Cash Flow Growth Rate: 10.1%


Discount Rate: 15.0%


Show Free Cash Flow numbers

$89.01 Book Price

Overvalued by 27.51%


Poor Cash Return on Invested Capital over the past 5 years

DE has been unable to consistently generate sufficient returns from its investments in buildings, projects and equipment. This could be due to poor management, lack of an economic moat or the capital intensive nature of the business.

DE has only created $2.81 of cash for every $100 invested.
Figures in USD. Fiscal year ends in October
20122013201420152016
Free Cash Flow -953.30M 879.00M 866.60M 914.20M 3.12B
divided by
Invested Capital 31.05B 32.41B 35.10B 32.94B 33.96B
Cash ROIC -3.07% 2.71% 2.47% 2.78% 9.19%

Excellent Return on Equity over the past 5 years

Over the past 5 years, DE has generated strong profits with money shareholders have invested. This is considered one of the best indicators of quality management. Beware of extremely high Return on Equity (> 50%) as this is often unsustainable.

DE has generated $33.28 of Earnings for every $100 of Shareholders' Equity.
Figures in USD. Fiscal year ends in October
20122013201420152016
Net Income 3.07B 3.54B 3.16B 1.94B 1.52B
divided by
Stockholders' Equity 6.84B 10.27B 9.06B 6.74B 6.52B
Return on Equity 44.89% 34.46% 34.90% 28.78% 23.37%

Excellent Business Performance over the past 10 years

DE has been able to maintain profitability in good times and bad. This could mean DE has an extremely strong business or has the ability to scale down costs when needed. This should be a fairly resilient business, but double check for future sustainability by looking at its Risk Factors in the Annual Report.

DE has created positive free cash flow for 9 or more of the past 10 years.
Figures in USD. Fiscal year ends in October
2007200820092010201120122013201420152016
Free Cash Flow 1.28B 340.80M 676.70M 969.40M 645.50M -953.30M 879.00M 866.60M 914.20M 3.12B

Weak Balance Sheet

DE's financial position is not ideal. The key is to check whether DE is using debt to fuel its growth and the sustainability of that tendency. Highly capital intensive businesses (see Economic Moat) follow this route, which can deeply impact the future prospects of the business.
Figures in USD. Fiscal year ends in October
2007200820092010201120122013201420152016
Cash 3.90B 3.19B 4.84B 4.02B 4.43B 6.12B 5.13B 5.00B 4.60B 4.79B
Current Assets 27.84B 27.84B 30.86B 33.37B 36.31B 42.72B 45.10B 46.04B 42.14B 46.91B
Total Assets 38.58B 38.73B 41.13B 43.27B 48.21B 56.27B 59.52B 61.34B 57.95B 57.98B
Current Liabilities 15.92B 15.26B 12.75B 14.36B 17.72B 19.09B 21.98B 21.23B 20.41B 19.24B
Total Liabilities 31.42B 32.20B 36.31B 36.98B 41.41B 49.42B 49.26B 52.27B 51.20B 51.46B
Stockholder' Equity 7.16B 6.53B 4.82B 6.29B 6.80B 6.84B 10.27B 9.06B 6.74B 6.52B
Current Ratio 1.75 1.82 2.42 2.32 2.05 2.24 2.05 2.17 2.06 2.44
TL-to-TA 0.81 0.83 0.88 0.85 0.86 0.88 0.83 0.85 0.88 0.89

Consistent Reinvestment of Profits over the past 10 years

DE has consistently retained profits. This may put DE in a strong position to invest for the future, by buying new machinery, investing in R&D or a number of other options. By effectively using these earnings, DE can greatly improve their long-term economic picture.
Figures in USD. Fiscal year ends in October
2007200820092010201120122013201420152016
Retained Earnings 9.03B 10.58B 10.98B 12.35B 14.52B 16.88B 19.65B 22.00B 23.14B 23.91B
Retained Earnings Growth - 17.15% 3.78% 12.50% 17.54% 16.23% 16.42% 12.01% 5.18% 3.31%

Competitive Industry over the past 10 years

DE is likely operating in an industry with medium to low barriers to entry. This may mean that DE doesn't have a characteristic that's hard to replicate, such as exclusive distribution, branding or the ability to keep costs low. If Gross Margins are at least satisfactory, it's likely that DE invests heavily in R&D and Sales, General & Administrative expenses.

Only $7.36 of every $100 of Revenue have been profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in October
2007200820092010201120122013201420152016
Net Income 1.82B 2.05B 873.50M 1.87B 2.80B 3.07B 3.54B 3.16B 1.94B 1.52B
divided by
Revenue 24.08B 28.44B 23.11B 26.00B 32.01B 36.16B 37.80B 36.07B 28.86B 26.64B
Net Profit Margin 7.56% 7.22% 3.78% 7.17% 8.75% 8.50% 9.36% 8.77% 6.72% 5.72%

Satisfactory Pricing Power over the past 10 years

Consistency is vital. DE has been able to maintain gross margins fairly consistently, which is a strong indication of their ability to raise prices with inflation. This potentially leaves flexibility in inflationary environments to raise prices on consumers and maintain profitability.

$31.32 of every $100 worth of sales have been Gross Profit, on average over the past 10 years.
Figures in USD. Fiscal year ends in October
2007200820092010201120122013201420152016
Gross Profit 7.83B 8.86B 6.86B 8.61B 9.98B 11.03B 12.13B 11.29B 8.72B 8.40B
divided by
Revenue 24.08B 28.44B 23.11B 26.00B 32.01B 36.16B 37.80B 36.07B 28.86B 26.64B
Gross Margin 32.51% 31.17% 29.67% 33.09% 31.17% 30.50% 32.09% 31.31% 30.21% 31.51%

High Capital Intensity over the past 10 years

DE spends large amounts of capital buying new equipment or investing in new facilities to stay competitive. Over the long term, those costs may have to be fuelled by debt. Look at the growth of Shareholders' Equity to see if this strategy is having a positive or negative impact.

84.81% of Profits are being spent on Capital Expenditures, like Property, Plant, & Equipment, required to run the business.
Figures in USD. Fiscal year ends in October
2007200820092010201120122013201420152016
Capital Expenditure 1.48B 1.61B 1.31B 1.31B 1.68B 2.12B 2.38B 2.66B 2.83B 644.40M
divided by
Net Income 1.82B 2.05B 873.50M 1.87B 2.80B 3.07B 3.54B 3.16B 1.94B 1.52B
Capital Expenditure Ratio 81.47% 78.34% 149.75% 70.39% 60.03% 69.05% 67.14% 84.07% 145.61% 42.29%

Very Strong Dividend History over the past 10 years

DE has consistently distributed a dividend for at least the past 10 years. Such a long dividend history suggests DE is very established in its market and that its dividend distribution is likely to continue for a significant period of time.
Figures in USD. Fiscal year ends in October
2007200820092010201120122013201420152016
Dividend Paid 386.70M 448.10M 473.40M 483.50M 593.10M 697.90M 752.90M 786.00M 816.30M 761.30M
divided by
Shares Outstanding 455.00M 436.30M 424.40M 428.60M 422.40M 401.50M 389.20M 366.10M 336.00M 316.60M
Dividend Paid Per Share 0.85 1.03 1.12 1.13 1.40 1.74 1.93 2.15 2.43 2.40
Price at Year End 84.93 35.32 52.73 81.65 77.35 84.55 90.82 89.46 77.50 103.04
Dividend Yield 1.00% 2.91% 2.12% 1.38% 1.82% 2.06% 2.13% 2.40% 3.13% 2.33%

Strong History of Stock Buybacks over the past 10 years

DE has a strong history of delivering increased value for shareholders in the form of stock buybacks. These have helped improve financial metrics and increase each shareholders' relative ownership stake in the company, due to fewer shares outstanding and holding the same number of shares.
Figures in USD. Fiscal year ends in October
2007200820092010201120122013201420152016
Shares Outstanding 455.00M 436.30M 424.40M 428.60M 422.40M 401.50M 389.20M 366.10M 336.00M 316.60M
Stock Bought Back - 4.29% 2.80% -0.98% 1.47% 5.21% 3.16% 6.31% 8.96% 6.13%
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