Agriculture & Turf Equipment segment
Deere & Company’s (DE) Agriculture & Turf Equipment segment is its largest revenue generator. It reported revenue of $6.29 billion in the fiscal third quarter, a 17.8% growth compared to the same quarter of the previous year when it reported revenue of $5.34 billion. It’s the segment’s highest third-quarter revenue since Q3 2015.
The segment’s revenue growth was primarily driven by higher shipment volumes and a higher price realization. However, a strong dollar had an adverse impact on its revenue.
In the third quarter, the segment reported an operating profit of $806 million compared to $693 million in Q3 2017, signifying a growth of 16.3% YoY (year-over-year).
The growth in DE’s operating profit was driven by higher shipment volumes, lower warranty expenses, and higher price realizations. On the other hand, an increase in research and development and production costs had an adverse effect on its operating profit. As a result, the segment’s operating profit margin contracted to 12.8% compared to 13% in Q3 2017.
For fiscal 2018, the Agriculture & Turf Equipment segment’s revenue is projected to rise 15%. It’s expected to grow across all the company’s regions with the exception of Asia, which is expected to remain flat. The United States and Canada are expected to see revenue growth of 10%, while the 28 members of the European Union are expected to grow between 5% and 10%. South America is also likely to remain flat. The company doesn’t expect any major foreign currency impact on the segment.
Investors can gain indirect exposure to Deere by opting for the VanEck Vectors Natural Resources ETF (HAP), which has invested 8.1% of its portfolio in Deere. The fund also provides exposure to ExxonMobil (XOM), Mosaic (MOS), and CF Industries Holdings (CF), with weights of 3%, 1.9%, and 2.05%, respectively, as of August 20.