COMPANY DESCRIPTION

Deere & Company (Deere or "the company"), through its subsidiaries, manufactures and distributes agricultural equipment, construction and forestry equipment, commercial grounds care machines, consumer lawn products, and utility vehicles. The company also offers related financial services. Deere operates in the Americas, Europe, Africa and Asia. It is headquartered in Moline, Illinois.

 

ECONOMIC MOAT

In our opinion Deere’s economic moat stems a combination of intangible assets and a network effect. Generations of North American farmers view the brand as a symbol of high quality and prestige. Deere has 1,539 agricultural equipment dealers. Customers prefer buying equipment that they are confident can be serviced within a short time frame. Deere’s financing business is tied into the dealer network.

 

OUTLOOK

Deere is facing the likelihood of worsening end-market conditions during fiscal 2015. Top- and bottom-line comparisons are likely to be unfavorable next year, as well. Though unlikely to stand out from the crowd in the coming year, this good-yielding equity holds decent total return potential to 2018-2020. 

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STRENGTHS

  • Robust dealer network

  • Broad product portfolio

  • Strong emphasis on new product development 

WEAKNESSES

  • Recalls impacting its brand image

  • Geographic concentration 

THREATS

  • Intense competition from global players

  • Foreign currency risk

  • Stringent engine and greenhouse gas emission standards

  • The Dodd-Frank Wall Street Reform and Consumer Protection Act 

OPPORTUNITIES

  • Focus on emerging nations

  • Inorganic strategy for growth

  • Positive outlook for construction and forestry markets 

The above report is for information purposes only, and is not a solicitation or offer to buy or sell any securities. Past performance is no guarantee of future performance. Neither diversification nor asset allocation ensures a profit or guarantees against loss. Before investing, investors should consider their risk tolerance, investment objectives, time horizon, available capital, and charges and expenses.  

 

The information presented in this report has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guranteed. All material is subject to change without notice. The views and opinions expressed are those of Focused Stock Research and/or WALT ST Investment Management, Ltd. and in no way reflect the views and opinions of Investment Consultants nor their Broker Dealers.

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