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Deere's Earnings Might Experience Another Dark Quarter in 3Q16

PART:
1 2 3 4 5 6 7 8
Part 4
Deere's Earnings Might Experience Another Dark Quarter in 3Q16 PART 4 OF 8

Analyzing Deere’s Tractor Sales: The Worst Isn’t Over

Deere’s monthly tractor sales

Based on the monthly retail figures released by the Association of Equipment Manufacturers, 2WD (two-wheel drive) tractors reported decent YoY (year-over-year) gains in May and June 2016 in the US and Canada. Markets in Canada continue to be weak as the number of 2WD tractors sold fell by 16.7% year-to-date until July to 6,590 units. In the US, 2WD farm (DBA) tractor sales rose by 9.8% to 82,662 units in the first seven months.

The data for May and June suggest that while sales figures are up, it could still get worse for 2WD tractors. Similarly, YoY sales in the 4WD (four-wheel drive) tractor and self-prop combines category were weak in the US and Canada in May and June. Deere reported that its growth figures for 4WD tractors and combines were worse than the industry average. In the agriculture equipment (MOO) market, Deere mainly competes with AGCO (AGCO) and CNH Industrial (CNHI).

Analyzing Deere’s Tractor Sales: The Worst Isn&#8217;t Over

Analyzing Deere’s Tractor Sales: The Worst Isn&#8217;t Over

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Small tractors fare better than bigger ones

Small tractors sales below 40 horsepower have increased 7% and 1% YoY in May and June, respectively, in the US and Canada. In its monthly retail sales comments, Deere mentioned that it grew more than the industry in both May and June in tractors below the 40-horsepower category.

In the 2WD, 40 horsepower–100 horsepower segment, Deere (DE) fared better than the industry in May and worse than the industry in June. Industry sales for 2WD 40 horsepower–100 horsepower tractors were flat in May and up 1% in June in the US and Canada.

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