To capitalize on growth in the Indian tractor market, Deere & Company (DE) continues to make investments in India. The company has decided to invest $100 million in building a new factory and expanding the existing tractor facility in Pune.
Small agricultural tractors will be manufactured in the new facility for sale in India and abroad. The company has not yet finalized the location for the new plant.
Deere’s connection with India goes back 60 years, mainly confined to the agricultural market, including sales of equipment. The company acquired the joint venture in 2009 that was created in 1997. John Deere India has been the largest exporter of agricultural machinery from India for the past 5 years.
Also, in 2005, Deere opened a technology and engineering center in Pune. The company also has a joint venture that builds construction machinery with Ashok-Leyland, a technology leader in India’s commercial vehicle industry.
More recently, in September 2010, Deere commenced building a factory for grain harvesting equipment in India and inaugurated a John Deere Water facility in early 2010.
The Indian Tractor industry is the largest in the world, with China and the U.S.A being the other major markets. Deere’s expansion plans will help it cater to the growing needs in these markets.
Deere’s agriculture and turf segment operates in the North American markets. Its competitors include AGCO Corporation (AGCO), CNH Global N.V. (CNH), Kubota Tractor Corporation (KUB) and The Toro Company.
Deere’s overseas expansion continues with the company planning to expend $50 million to build a new factory in China to manufacture construction equipment for China’s domestic market and for export to other markets.
Deere reported a strong fiscal fourth quarter earnings of $1.07 driven by positive conditions in the U.S. farm sector particularly in terms of demand for large equipment somewhat offset by weak European agricultural markets.
The Zacks Consensus Estimate for fiscal first -quarter 2011 is 99 cents per share. For fiscal years 2011 and 2012, the Zacks Consensus Estimates are a respective $5.48 per share and $6.45 per share.
We maintain our “Neutral” recommendation on Deere. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.
Illinois-based Deere & Company is engaged in the production and distribution of agricultural and forestry equipment, construction equipment and engines worldwide. It also provides financial and other related services.
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