Deere (DE) (TNH) (AGU) (DE) (AGCO) Driven by Wheat, Corn Profits

Wheat and corn prices continue to drive the profits of farmers up, resulting in capex from them toward companies like Terra Nitrogen Company, L.P. (NYSE:TNH), Agrium (NYSE:AGU), Deere & Co. (NYSE:DE) and Agco (NYSE:AGCO) driven up by wheat, corn profits.

How quickly the griping from farmers has subsided since the worst of the recession when they were complaining about high input costs.

The U.S. will control 28 percent of global wheat exports in 2011, an increase from 18 percent in 2010, according to the U.S. Department of Agriculture. With prices averaging about $8 a bushel this quarter and the next, the highest levels in three years, farms will earn approximately $94.7 billion, according to analysts’ forecasts compiled by Bloomberg and an estimate from the USDA.

Other considerations for investors to consider is how this will impact shipping. Expectations are shipping lines won't benefit much from the increase in production because the U.S. is replacing lost supply from Russia and Ukraine.

Domestically it could help those companies shipping within borders, as it could offer some major boosts in that regard.

Dividend Yields for (DE) (GR) (PLL) (FLS) (IR)

Indicated dividend yields for Standard & Poor's 500 Index companies Deere & Co (DE), Goodrich Corp (GR), Pall Corp (PLL), Flowserve Corp (FLS) and Ingersoll-Rand PLC (IR).

These dividend data indicate dividend yields of companies in the Standard & Poor's 500 Index as of Saturday, April 30. The yield is determined by taking the latest declared dividend, annualized and divided by the price of the stock. Payout ratios are calculated based on latest quarterly dividend paid divided by earnings.

Deere & Co (DE) has a dividend yield of 1.44 percent on a declared dividend of $0.35. The payout ratio is 24.6 percent.

Goodrich Corp (GR) has a dividend yield of 1.31 percent on a declared dividend of $0.29. The payout ratio is 18.7 percent.

Pall Corp (PLL) has a dividend yield of 1.20 percent on a declared dividend of $0.17. The payout ratio is 26.9 percent.

Flowserve Corp (FLS) has a dividend yield of 1.01 percent on a declared dividend of $0.32. The payout ratio is 18.4 percent.

Ingersoll-Rand PLC (IR) has a dividend yield of 0.95 percent on a declared dividend of $0.12. The payout ratio is 19.1 percent.

Syngenta (SYT) (MOS) (DE) (CF) (AGU) Down on Wheat, Corn Oversupply Fears

Syngenta (NYSE:SYT), Mosaic (NYSE:MOS), Deere (NYSE:DE), CF Industries (NYSE:CF) and Agrium (NYSE:AGU) close down Thursday on wheat, corn oversupply concerns.

A growing concern there could be a glut of wheat and corn on the market pushed down the shares of fertilizer and agriculture stocks Thursday.

"Although there have been muted concerns about the development of wheat crops in the Black Sea region, the trade is concerned that Russia and the Ukraine will be offering new crop wheat to the global market," said a Benson Quinn Commodities note.

The Ukraine also removes its corn export quota this week.

The weaker U.S. dollar wasn't enough to stem the losses Thursday. The U.S. dollar index fell 0.4% to $73.05.

Wheat for July delivery fell 2.6 percent to $7.90 3/4 a bushel. Wheat was one of the biggest commodity laggards Tuesday. Meanwhile, corn for July delivery was down 1.2 percent to $7.50¼ a bushel.

Caterpillar (CAT) (AGCO) (DE) (MON) Jump on Rising Wheat Prices

Shares of Caterpillar (NYSE:CAT) and AGCO (NYSE:AGCO) Deere (NYSE:DE) and Monsanto (NYSE:MON) are all trading up today on news wheat is helping farmers generate profits which should boost the bottom line of the Ag companies.

Wheat is now trading at about $8 a bushel, the highest level in three years. Poor weather conditions should help wheat to continue to rise in price over the next month or so.

Wheat exports from America are also estimated to rise by 18 percent over last year, according to a Bloomberg report.

Jefferies analyst Stephen Volkmann wrote, “Going into the winter, the US winter wheat crop condition was already well below last year, with only 47% in good/excellent condition and 17% in poor/very poor condition, compared to 63% good/excellent and 6% poor/very poor last year. With the spring thaw, this has now declined to only 36% in good/excellent condition, and 38% in poor or very poor condition. At the same time, most of the poor crops are concentrated in prime wheat producing states – Kansas, Oklahoma, Texas, and to a lesser extent, Nebraska – suggesting that the impact on yields could be larger.”

Higher crop prices provide more confidence and capital for farmers to spend on a variety of needed inputs.

Caterpillar was trading at $107.89, gaining $2.22, or 2.11 percent, as of 2:44 PM EDT. AGCO was at $53.17, up $1.35, or 2.61 percent. Deere was trading at $93.71, rising $1.33, or 2.11 percent. Monsanto was trading at $67.48, increasing $0.63, or 0.94 percent.

Post QE2 Trading with (MSFT) (DELL) (HPQ) (WMT) (PG)

As QE2 winds down plays that look the best continue to be commodity-based companies and blue chips stocks with low valuations.

The latter group would include companies such as Microsoft (NASDAQ:MSFT), Dell (NASDAQ:DELL), Hewlett-Packard (NYSE:HPQ), Wal-Mart (NYSE:WMT) and Procter & Gamble (NYSE:PG).

Some companies, to give an example, which wouldn't fit into that scenario wold be Caterpillar (NYSE:CAT) and Deere (NYSE:DE). It's not that they're not great companies to hold, just that they have most of the optimism already priced into them. The assumption for some investors with them is they believe the profit margins will remain strong at the two companies, which isn't a surety in any way. They've become risky at these levels.

The reason blue chip stocks like those listed above are a solid bet, is as mentioned, the current valuations, but also the ability of the larger companies to be able to pass on higher costs of inputs.

Deere (DE), AIG (AIG) Hurt by Japan Earthquake

Although disparate companies, Deere (NYSE:DE) and AIG (NYSE:AIG) both said the earthquake and tsunami in Japan will have a negative impact on them.

Deere said they will have delays with its excavators in direct connection to the Japan disaster, according to a regulatory filing.

American International Group Inc. said they see the Japan crisis, and other events in the first quarter, will end up costing them at close to $1 billion.

Deere & Company closed Friday at $90.10, gaining $0.72, or 0.81 percent. AIG closed at $34.95, down $0.75, or 2.10 percent.

FedEx (FDX), (AKAM), (CLF), (NOV), (SLB) Lead S&P 500

FedEx (NYSE:FDX), Akamai (NASDAQ:AKAM), Cliff Natural Resources (NYSE:CLF), National Oilwell Varco (NYSE:NOV), and Schlumberger (NYSE:SLB) were leading the S&P 500 up today, with FedEx helping pull the index up after a solid earnings report.

The delivery company was up over 5 percent earlier in the session but have pulled back some as the day progressed.

Natural resource and energy companies are dominating the S&P today, with others like Diamond Offshore (DO), Pioneer Natural Resources (PXD), Deere & Co. (DE) and Noble Energy (NBL) among the top performers.

Schlumberger was trading at $86.31, gaining $3.21, or 3.86 percent, as of 2:30 PM EDT. National Oilwell Varco was at $77.54, up $3.13, or 4.21 percent. Akamai was trading at $36.68, adding $1.72, or 4.92 percent. Cliffs Natural Resources was trading at $88.30, gaining $4.57, or 5.46 percent. FedEx was at $88.36, up $3.08, or 3.61 percent.

Analysts Upbeat on Syngenta (SYT), Archer Daniels Midland (ADM), CF Industries (CF), Potash (POT), Deere (DE)

Potash (NYSE:POT), Syngenta (NYSE:SYT), Archer Daniels Midland (NYE:ADM), CF Industries Holdings (NYSE:CF) and Deere & Company (NYSE:DE) are five agriculture stocks with potential upside of 8%-21%. Being analysts' favorites, these stocks have no sell ratings.

The agriculture industry is the talk of the street since a few months now, as global food demand has elevated to historic highs. The beneficiaries of this trend include the farming industry, equipment suppliers, fertilizer and pesticide companies and other service providers.

Moreover, weather-related production shocks in major food exporting countries have triggered this crisis. On the demand side, rising income levels and a growing middle-class in emerging markets like China and India are pushing food demand further.

With the world facing tight supply conditions for milling-quality wheat, as Australian wheat production has downgraded and European supply is offline, the U.S. is now the best source for milling-quality wheat to meet increasing demand from North America and the Middle East. To benefit ethanol producers, the U.S. government has extended its 45 cents per gallon tax credit by a year.




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Deere (DE) Wants to Double Sales by 2018

Deere & Co. (NYSE:DE), the world’s largest manufacturer of agriculture equipment, said it plans to almost double sales to $50 billion by 2018 by expanding operations outside the U.S.

The company has a goal of achieving a 12 percent operating margin by 2014, Chief Executive Officer Sam Allen said today at Deere’s annual shareholder meeting at its Moline, Illinois, headquarters. Deere will intensify its focus on its agriculture business, which will continue to be the company’s biggest unit, and the construction unit, Allen said. The company will also make “major investments” in construction to enhance its global presence, he said.

“The revised strategy also lays out some challenging aspirations or goals,” he said. “By hitting these marks, the company would grow to about twice its present size and deliver about three times as much economic profit at normal volumes.”

Deere raised its fiscal 2011 profit forecast last week after advancing crop prices boosted North American sales of combines and tractors. The company got 35 percent its sales from outside the U.S. and Canada in the fiscal year ended Oct. 31.





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Deere (NYSE:DE) Jumps on 35 Percent Increase in Equipment Sales

Deere & Company (NYSE:DE) easily beat Street estimates in its latest quarter, as equipment sales soared 35 percent.

Earnings crushed earnings estimates, generating $1.20 a share, while analysts on average were looking for 99 cents a share.

Samuel R. Allen, chairman and chief executive officer, said, "John Deere's first-quarter results reflect improving demand for our innovative lines of equipment coupled with the skillful execution of our business plans. Our actions are helping attract customers through advanced new products and technologies. Sales of large farm machinery, particularly in the United States and Canada, are continuing to make a major impact, while construction equipment shipments are experiencing some degree of recovery"

Strong food prices last year helped farmers generate more earnings as well, providing them with the capital and will to increase acquisitions of machinery.

Net equipment sales increased to $5.5 billion, up from $4.2 billion in sales last year in the same quarter. That was below the $5.67 billion in sales the Street expected, although still a 35 percent gain.

Guidance for full year profits was boosted from $2.1 billion to $2.5 billion.

Deere was trading at $95.59, gaining $1.97, or 2.10 percent, as of 11:47 AM EST.

Deere (NYSE:DE), AGCO (Nasdaq:AGCO) Look Strong on Ag Secular Growth Trends

Citing a continuous solid secular growth trend in agriculture, Barclays (NYSE:BCS) sees Deere (NYSE:DE) and AGCO (Nasdaq:AGCO) doing well in 2011 as machinery spend accelerates.

Barclays said, "On Friday, we attended AgConnect in Atlanta, GA and came away with increased conviction around the outlook for North American ag equipment spend, which we think could be up MSD in FY11, possibly better. This view represents upside to the flat end market outlook from both DE and AGCO. OEs noted solid backlog levels driven by strong crop prices and highly constructive farmer economics. Given the solid demand picture, the OEs sounded comfortable with their ability to put thru price increases in the 5-7% range for IT4 equipment.

"We continue to like the long-term secular growth trends in the ag end market: These include changing dietary trends in the emerging markets, continued support from ethanol and increased mechanization of farming practices globally. We reiterate our Overweight rating on Deere (NYSE: DE) and our Equal Weight rating on AGCO Corp (Nasdaq: AGCO)."

Deere (NYSE:DE) was trading at $84.72, up $0.40, or 0.47, as of 2:48 PM EST. AGCO was trading at $52.09, up $0.11, or 0.21 percent.

Citigroup (NYSE:C) Bumps Up Deere's (NYSE:DE) Price Target

Citigroup (NYSE:C) has a "Buy" rating on Deere & Company (NYSE:DE) and bumped up their price target significantly on the equipment maker.

Citi said their "Buy" rating reflected slower tonnage in the North American market and sales growth estimates of 8 percent. Overall this could end up with operating profits declining over a period of time.

Earnings per share for full year 2011 are below consensus, with Citi seeing $5.21 a share, and consensus at $5.32. For 2012, earnings per share are estimated to come in at $6.00 by Citigroup, while consensus is at $6.32.

Deere & Company was trading at $75.72, falling $0.28, or 0.37 percent at 12:39 PM EST. Citi raised their price target on them from $75 to $87.

Deere (NYSE:DE) Earnings, Price Target Boosted by Argus

Saying they see Deere (NYSE:DE) continuing to perform strongly into 2011, based on their latest quarterly report, Argus Research maintains their "Buy" rating on them, while raising their price target significantly.

Argus said the latest quarterly results were "much better than we expected..." and believe that there will be "continued strong results in fiscal 2011."

Earnings estimates for full year 2011 were raised from $4.85 to $4.95 and set a full year 2012 estimate of $5.30.

Deere & Company closed Friday at $76.00, losing $0.23, or 0.30 percent. Argus raised their price target on them from $76 to $88.

Deere (NYSE:DE), AGCO (NYSE:AGCO), CNH (NYSE:CNH) Up on Bullish Farm Equipment Outlook

With the price of crops pushing revenue and earnings up for farmers, farm equipment producers like Deere & Company (NYSE:DE), AGCO (NYSE:AGCO) and CNH Global NV (NYSE:CNH) are in favor with analysts, and UBS (NYSE:UBS) raised their ratings and/or price target on the companies.

This is centered around the probably assumption farmers will add newer equipment over the next year because of more cash on hand.

Deere & Company is the top play in the sector for UBS, which raised them from "Neutral" to "Buy." AGCO (NYSE:AGCO) was upgraded from "Sell to "Neutral." CNH Global NV had their price target raised by UBS on them, along with the others.

UBS said, "While farmers bought some equipment ahead of 2011 Tier 4 engine [emissions] standards, dealers generally believed sales could be 10% higher in 2011 given strong farmer confidence due to high commodity prices."

Deere was trading at $77.60, gaining $0.32, or 0.41 percent at 1:55 PM EST. AGCO was at $47.13, rising by $1.33, or 2.90 percent. CNH 44.11 was at $44.11, increasing by $1.39, or 3.25 percent at 1:56 PM EST.

Deere (NYSE:DE) Remains Premium Farm Machinery Play Says Jefferies

Jefferies remains positive on Deere (NYSE:DE), as the company, in their estimation, is still the premium play in the farm machinery sector.

"Deere is the premium machinery play on the global farm sector, where growth is resuming after a relatively modest 2009 ag downturn. The company is also a call option on a replacement cycle in North American construction once the housing situation stabilizes," said Jefferies.

The company also raised the earnings per share outlook for full year 2010 from $23 billion and $4.50 a share, to $23.4 billion and $4.59 a share. For full year 2011, they have EPS raised from $5.30 to $5.50, and for 2012, EPS was increased from $27.5 billion and $6 a share to $28 billion and $6.25 a share.

Jefferies maintains a "Buy" rating on Deere. They were trading at $77.08, gaining $1.08, or 1.42 percent at 10:00 AM EST.