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Deere’s Construction Equipment Retail Sales Improved in September

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Construction equipment sales were weak

Monthly retail figures for construction (ITB) equipment sales released by Deere & Company (DE) and Caterpillar (CAT) show a continued fall, despite the upturn in construction (XHB) and the rise in construction spending in 2016. The contrasting picture stems, in part, from the glut in construction machinery. More excavators and backhoes are being pulled from servicing the oil and gas market.

Caterpillar’s YoY (year-over-year) monthly retail sales in construction equipment in North America fell 14%, 14%, and 17%, respectively, in June, July, and September 2016. These falls were worse than the falls of 1%, 3%, and 9% reported in the first three months of the year. Terex (TEX) is a major competitor in the construction equipment business. It doesn’t publish a monthly retail sales report.

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Deere’s retail sales

In its August retail sales report, Deere reported double-digit falls in both its first-in-the-dirt and settlement sales. Its September report was better, with a single-digit fall in its first-in-the-dirt sales and a single-digit rise in its settlements. 

“First-in-the-dirt” is the first transaction of a new machine. It represents the combination of new retails and first rentals. “Settlement” refers to the combination of new retails and rental conversions. The number of settlements is seen as the number of final deliveries achieved in the month.

“New retail” refers to the transfer of new machines from dealers to end users and from Deere to independent rental companies. “First rentals” are the number of units rented to first users from the units owned by Deere under rental programs. “Retail conversion” refers to the sales of previously reported first rentals to end users.

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