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Deere & Company - Farm and Construction Machinery

Deere & Company - Farm and Construction Machinery. Bill Dailey 02/05/2014. Deere & Company. Segments Agriculture and Turf - $29.1B Construction and Forestry - $5.9B Power Systems (engines) Parts and Services - $682M Financial Services - $2.1B 2013

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Deere & Company - Farm and Construction Machinery

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  1. Deere & Company - Farm and Construction Machinery Bill Dailey 02/05/2014

  2. Deere & Company • Segments • Agriculture and Turf - $29.1B • Construction and Forestry - $5.9B • Power Systems (engines) • Parts and Services - $682M • Financial Services - $2.1B • 2013 • Income of $3.54B on revenues of $37.8B • Third consecutive year of record earnings, eighth time in last ten years • Quarterly dividend increased by 11% to $1.99/share

  3. Company Comparisons • Caterpillar is most similar • Both have financing operations • Caterpillar’s revenues come mainly from their construction and mining divisions • Joy Global • Operates in the mining industry • Much smaller revenue numbers • Komatsu • Operates mainly in the construction industry • Very small portion in the farming industry • Tractor and Agriculture Machinery Manufacturing • Deere holds 40%, followed by CNH Industrial with 11.7%

  4. Return on Net Enterprise Assets (RNEA)

  5. EPAT from Sales

  6. Enterprise Profit Margin (EPM)

  7. Enterprise Asset Turnover (EATO)

  8. Revenues

  9. Enterprise Profit Margin (EPM)

  10. Enterprise Asset Turnover (EATO)

  11. Assumptions • Sales Growth Rate • Net Sales and Other Income - 2.0% • Stagnant growth in the beginning due to sale of JD Landscapes • ‘Eyes on the Horizon’ initiative - $50B in sales by 2018 • Finance and Interest Income - 5.0% • Successful portfolio of receivables • Low level of uncollectable accounts • Enterprise Profit Margin (EPM) - 10.5% • Leaders within the agriculture industry - pricing premium • Enterprise Asset Turnover (EATO) - .85 • Increasing the size of the financing portfolio • Attempting to localize manufacturing - 7 new factories in 2013

  12. Assumptions

  13. Assumptions

  14. Assumptions

  15. Assumptions

  16. Further Analysis • Look more closely at the breakdown between the manufacturing and the financing operations • Focus on the sale of JD Landscapes • Will retain 40% and give up control • Will no longer consolidate • Q1 2014 Earnings call on February 12th

  17. Discounted Cash Flow Model

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