The company's year-on-year Q4 numbers remained shabby at face value...
This is anticipated to continue into Deere's fiscal 2016 as the industry outlook remains flat to negative at a sales level across all geographies. Nevertheless pricing is still anticipated to remain positive and the company was at pains to note that these were industry-wide estimates.
Nevertheless there are some positives with the company noting on the conference call:
'demand/supply balance even more compelling than a year ago despite a year of strong production'
inventories - 'much more favourable position than the competition'
‘long-term fundamentals for the agricultural business in Brazil remain solid’
‘all-time record high for John Deere Financial’
‘leasing is becoming more popular for many of our customers’
And then there is valuation. With a now 3%+ dividend yield and free cash flow of US$2.7bn being all applied to a share buyback (so equivalent to c. 10% of market cap) returns to investors are reasonable. Cash flow generation will be less in FY16e as per the forecast below but at a historic FY15A x8 market cap:ebit multiple the metrics are not extended.
Even though there was no mention of the longer-term thematic drivers (ex the quote above) Deere remains in a good place to benefit from such factors. Trading is still not easy but I still see value - as I do with sector peer Agco (see my most recent write-up of this name here). I remain long both names and pleased to see positive reactions to clearly still mixed numbers reflecting the low sentiment towards the space currently.