Deere 4Q16 Earnings Call Notes

Deere & Company’s (DE) Q4 2016 Results

Josh Jepsen

Farm cash receipts should be about the same in 2017 as 2016

“Given the large crop harvests in 2015 and consequently to lower commodity prices we are seeing today, our 2016 forecast calls for cash receipts to be down about 6% from 2015 levels. Moving to 2017, we expect total cash receipts to be approximately $367 billion, about the same as in 2016 as lower livestock cash receipts are offset by higher crop receipts.”

Anticipate lower industry sales in China

“In China, slower economic growth persists and ag policy changes are causing short-term uncertainty for most domestic and global markets. As a result, we anticipate lowered industry sales. Turning to India, the government continues to focus on reviving growth in the ag sector and improving farm incomes.”

Market demand for construction equipment continues to be weak

“Moving to Slide 16 and looking at the economic indicators on the bottom part of the slide. GDP growth is positive. Construction spending is increasing and housing starts are expected to exceed 1 million units again this year. In spite of these positive signals, the market demand for construction equipment continues to be weak. Factors contributing to the weakness have not changed dramatically over the past quarter. Conditions in the oil and gas sector, for example, continued to be slow. Also, construction contractors are delaying fleet replenishment because of the uncertain markets. Rental utilization rate declines persist, leading to a reduction in fleets and elevated levels of used inventory. Housing starts in the U.S. for single-family homes remain below the long-term average and multifamily home construction is slowing due to overbuilding in some parts of the country. On balance, Deere’s construction and forestry sales are forecast to be up about 1% in 2017 with positive currency translation of about 1 point. Global forestry markets are expected to be roughly flat in 2017. C&F’s full year operating margin is projected to be about 3.5%.”

Tony Huegel

We’re modelling different scenarios for the Trump presidency, but at this point they are speculation

“Yes. I am going to take that question and make it broader than just tax. And what I would tell you is the thing – the most important thing is anything that’s being talked about in media and anywhere else is obviously speculation at this point in terms of what may or may not happen. And so certainly internally, we are evaluating different scenarios. So, the short answer to your question is the, of course, we are looking at what that impact may or may not be, but we are looking at all kinds of scenarios, because at the end of the day, we want to be prepared for whatever does become reality. But we are – at this point, it would be premature to talk about that publicly just because it would be pure speculation, so – but we do appreciate the question.”