Did you also sell-off Deere's
Deere is projecting its full-year net income to be $3.28 billion, which is way above its record-high net income of $2.8 billion recorded last year. And it is expecting ag-related equipment sales to go up by 15% this year. Where is the problem? I see nothing standing in the path of a John Deere tractor at this point.
No need to worry
Deere's projection of 15% higher agriculture equipment sales looks reasonable. The company might be expecting lower prices for corn, wheat, and soybeans this year, but that doesn't mean its sales will fall off the cliff. Even if prices decline a bit, demand for essential crops like corn is likely to stay put because the world will not stop eating, and so farmers will not stop planting.
In fact, most industry players have reported good numbers and are expecting higher sales this year. AGCO
I've got support …
Although agriculture remains the key business for Deere, let's not forget its construction and forestry business that continues to add much value. The segment contributed nearly 23% to Deere's total equipment sales in the first quarter. Sales climbed a healthy 22% backed by higher volumes and prices, and operating profits rose an astounding 41%.
Deere has raised its sales-growth forecast for the segment to 18% from the previous 16%. What's more, the company is investing big-time in the segment, from entering the high-potential Brazilian construction market through two new factories in Sao Paulo to expanding existing plants. This business looks ready to take off.
The Foolish bottom line
Deere delivered in 2011 with a record number of product launches and expansion plans, but it would be unreasonable to expect the company to do it every year. I favor the company's conservative full-year guidance, because setting realistic goals and hitting those targets seems more reasonable than setting unattainable expectations.
One must also not overlook the 175-year-old stalwart's strong balance sheet and impressive dividend growth. I like Deere, and I won't let temporary price movements ride over my decisions for the long haul.