Wednesday, August 19, 2009

Deere Needs to Beef Up Earnings Release

Deere & Co (DE) reported terrible results in a terrible market. Somehow investors were surprised and sold off the stock. At this stage of the game you should no longer be surprised by bad operating news. Every business is having major difficulty. If you need to factor that into your thinking now, you are very late.

The earnings report played to the bad news and even admitted that this is the worst decline in fifty (50) years. They did not address their balance sheet other than pointing out that they have reduced their inventories as a percentage of sales. There was no mention of retailer inventories, age of existing equipment and what replacement cycle we may be looking at. There was also no mention of other balance sheet items such as cash and come to think of it I did not spot the sources and uses of cash with the press release. (I know it’s most likely disclosed elsewhere so the SEC says OK but the investor has to really hunt around.)

The lack of management commentary creates the impression that they are just a cork bobbing around on the tide hoping that good things happen soon.