Deere's Awesome (and Disappointing) 2011
Great operational performance but disappointing stock price movements marked the fate of many companies in 2011. Farm-equipment giant Deere (NYS: DE) is one such case. 2011 was nothing short of a record year for Deere, but this couldn't prevent its shares from ending the year down nearly 7%.
I think it was mainly global slowdown fears that caught the shares on the wrong foot. Otherwise, there were not many reasons for not applauding the company for such an outstanding year. Let's rewind 2011 for a look at the details.
2011 was an exceptionally good year for Deere, with both its top and bottom lines touching record highs of $29.5 billion and $2.8 billion, respectively. Deere posted increased revenue and net income in each quarter this year compared to last year, as demand for Deere's equipment continued to rise globally.
Deere ended the year with an awesome cash balance of $3.7 billion. It also raised its quarterly dividend during the year, taking its yearly dividend to $1.64 per share. Deere currently yields a solid 2.1%.
While maintaining a solid performance throughout the year, Deere made sure it left no stone unturned in growing its business.
A heck of a lineup
In 2011, Deere unveiled its largest-ever lineup of new agriculture equipment, making it the most significant product introduction in the company's history. The products, which include tractors, combines, and platforms, are the most innovative and technologically advanced equipment Deere has ever designed.
In fact, the company introduced the highest number of products in 2011, and also announced several new factories across the globe. Deere ended the year spending more than $2 billion on research and development and capital projects.
Speeding into the growing world
After successfully establishing its agriculture and forestry equipment business in Brazil, Deere smartly decided to tap the huge opportunities the Brazilian construction market is brimming with. Brazil has swept the entire industry off its feet. Think of crane maker Manitowoc (NYS: MTW) , which is building a 250,000-square-foot crane plant near Paso Fundo that should help the company tap into infrastructure opportunities including the huge demand created by the 2014 World Cup and 2016 Summer Olympics, both in Brazil. Terex (NYS: TEX) agreed to acquire a stake in Ritz do Brazil, an equipment maker for power lines, and is also waiting for the pause in government financing for its Brazilian-based road building business to end soon.
It would have been a surprise had Deere not ventured into Brazil the way these companies did. In October, Deere announced its plans to start building two construction factories in Sao Paulo, with production expected to begin by the end of 2013.
Deere's focus in the other emerging nations is equally impressive. Deere is a household name when it comes to farm equipment and farming communities in emerging economies like India use its equipment.
Construction of Deere's new tractor and engine facilities in India as well as China started full swing in 2011, and production is expected to begin in 2013. These two countries have also caught the eye of industry players such as biggie Caterpillar and engine giant Cummins. Cat unveiled big expansion plans in China last year, and could be set to gain leadership position in the country. Meanwhile, Cummins joined hands with a China-based company to build engines to cater to the growing Chinese market.
Final thoughts on 2011
Deere is an excellent agriculture and emerging-market play. Its flattering performance last year is solid proof of the resilience agriculture has shown to the economic uncertainty. The construction boom in developing regions is another added advantage for Deere.
Both these factors proved to be the backbone of Deere's strength last year. The company looks like an intriguing play for 2012, as demand for agricultural equipment is expected to remain firm in the wake of the agriculture boom. I believe Deere looks poised to grow as much this year as it did in 2011. Keep tracking this company by adding it to your free Fool watchlist.
At the time this article was published Neha Chamaria does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Cummins. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.