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It's No Time to Plow Deere Under

By David Smith – Updated Apr 5, 2017 at 9:04PM

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Despite softness in some units, Deere's ag unit is flourishing.

Perhaps as much as any heavily global company you can think of, it's becoming more important to break Deere (NYSE:DE) into it its component parts for a real understanding of its current status and future prospects.

But before we do that, let's cast a quick glance in the direction of Deere's $575.2 million -- or $1.32-per-share -- profit for the quarter. Those figures were up about 7% on the net income line from the $537.2 million in the second quarter a year ago. Higher expectations for the period -- more along the lines of $1.36 per share -- resulted in the company's shares taking about a 3.2% hit amid Wednesday's triple-digit market tumble.

As you know from your sojourns down your neighborhood grocery isles, world agricultural prices continue their unceasing climb, leading in part to a 35% quarterly increase in global agricultural equipment sales at Deere. And even more impressive was the group's operating profit jump of 47%. Looking ahead, management expects to at least maintain its active agricultural pace, with about 38% sales growth for the year.

But lest you think everything is coming up roses -- or corn, or alfalfa -- at Deere, sales in the Commercial & Consumer sector dipped by a single percentage point, and its operating profit contribution slid by 28%, based on various types of headwinds, including higher materials costs. Beyond that, the Construction & Forestry unit saw its sales hit by 7% in the quarter, while its operating profit fell approximately 38%.

Clearly, along with other companies with strong agricultural businesses, such as chemicals manufacturer DuPont (NYSE:DD), and seed and fertilizer purveyors Monsanto (NYSE:MON), Mosaic (NYSE:MOS), and Potash Corp. of Saskatchewan (NYSE:POT), Deere is being carried nicely by its operations in this burgeoning sector.

Ag isn't Deere's only business, but with the agricultural sector still comprising almost 60% of Deere's total sales, and with ag-related sales expected to remain strong throughout much of the world, Deere clearly isn't a stock deserving of being plowed under.   

More than 2,000 Motley Fool CAPS players are bullish on four-star Deere. Would you care to cultivate an opinion of your own?

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Fool contributor David Lee Smith owns neither a green lawn mower nor shares in any of the companies mentioned. He does welcome your comments. The Fool has a disclosure policy.

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Stocks Mentioned

Deere & Company Stock Quote
Deere & Company
DE
$334.22 (-3.44%) $-11.91
Nutrien Stock Quote
Nutrien
POT
E. I. du Pont de Nemours and Company Stock Quote
E. I. du Pont de Nemours and Company
DD
The Mosaic Company Stock Quote
The Mosaic Company
MOS
$48.53 (-7.60%) $-3.99
Monsanto Company Stock Quote
Monsanto Company
MON

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