The great news from CNH Global [CNH Global +12% on Great Earnings] and Agco [Agco Reports a Great Quarter and Agriculture Bull Just Keeps Rolling] has long been forgotten in the current panic, but these are the names with true growth. I continue to look at agriculture as a seismic demographic shift regardless of US recession, or global slowdown. All these companies do is continue to execute, and raise guidance and say great things. It has not mattered of late, but it does not change the fact they are having incredible results.
Who is getting richer in this world? Farmers and producers of oil. Find those dollars, and then find their customers. The market could care less about such logic now but these are fundamental truths, regardless of terrible decisions by our financial institutions. I know I sound like a broken record in this sector, but the results of these companies speak for themselves. I expect the mutual fund industry to start jumping into this sector like they did energy about 3 years ago.
I'm actually selling more ultrashorts to raise cash and I bought more Agco which has held up better than CNH Global. I initiated Agco last week, and am now taking it up to a 1.7% position. It would be higher but I am out of cash... the weakness in CNH Global is strange considering the results of the company and the outlook.
- Deere & Co. (DE) reported better-than-expected earnings on Wednesday, and provided an upbeat outlook for the coming year, as strong sales to farmers worldwide offset a downturn in construction sales, especially in the United States.
- Much of the gain came from international sales, which were lifted by increased demand for farm equipment in markets outside of North America -- but benefited as well from the decline of the U.S. dollar. Deere said more than a third of its 2007 sales came from outside the United States and Canada.
- Markets where Deere experienced especially large gains in 2007 were in Central and South America, up 60 percent year over year, and Central Europe and CIS, up 52 percent.
- Robert McCarthy, an analyst at R.W. Baird, called the results a "blowout," and the company's shares rose in early trading even as the broader market fell.
- Deere, the world's largest maker of agricultural machinery, said it earned $422.1 million, or $1.88 a share, in the fourth quarter, compared with $277.3 million, or $1.20 a share, last year. Net revenue rose 20 percent to $6.14 billion. Analysts on average expected the Moline, Illinois-based company, which also makes earth-moving and forestry equipment, to report earnings of $1.54 a share on sales of $5.23 billion, according to Reuters Estimates.
- Deere said sales in its agricultural and commercial and consumer divisions both jumped 35 percent during the quarter, while sales to the construction and forestry industries fell 11 percent.
- "Overall a very strong performance," Terry Darling, an analyst at Goldman Sachs, wrote in a note to investors.
- The company said it expects first-quarter equipment sales to rise about 25 percent. It forecast that full-year 2008 profit would rise to $2.1 billion -- up more than 15 percent from the $1.8 billion it reported this year. It said the improved results would be a function of what it characterized as "a substantial jump" in farm cash receipts.
- Farmers around the globe are enjoying high prices for many of their crops thanks, in part, to the surge in interest in biofuels. As their incomes have risen, they have rushed to buy newer, more powerful tractors and combines, lifting the earnings of Deere as well as rivals Agco Corp (AG) and CNH Global NV (CNH).
- Deere said it benefited from the weakness of the U.S. dollar, adding 9 percentage points to sales outside the United States and Canada for the quarter and 7 points for the year.
- Morgan Stanley analyst Robert Wertheimer said the ramp-up in farm machinery profit has not fully developed, meaning Deere has plenty of room to grow. "Deere is still in the early stages of a multi-year boom in farm equipment, led by rising ethanol demand," he said in a note to investors.
