Some upside next year could result from any recovery in commercial and forestry, which is quite depressed right now due to the housing implosion. Deere is managing this group well, modulating production to retail demand and limiting the sales decline to 7% this quarter. Management expects sales for the year in this group can rise 4%.
Investors do have a right to be disappointed when a momentum darling like Deere disappoints, but a look under the hood shows the situation to not be so bad. Aggressive pricing, supported by robust end market conditions, will flow through to margins in 2009. Look for 2009 numbers to rise even if 2008 numbers stay flat, supporting the stock over the longer term.
For Dvorchak's preview heading into the Deere conference call, please click here.
Industrials DE Preview: Bar Set Pretty High 5/13/2008 10:02 AM EDT Analysts are looking for earnings of $1.75 per share on $7.6 billion in sales.
Industrials Celestica's a Rising Star 5/9/2008 3:16 PM EDT Its limited exposure to consumer products and a superior balance sheet make it a clear choice over competitor Jabil.
At the time of publication, Dvorchak was long Deere, although positions can change at any time.
Gary Dvorchak is a managing partner of Aviance Capital Management, a Sarasota, Fla.-based institutional asset manager that manages $200 million in growth and value equities and fixed income. Dvorchak holds a master's degree in business administration from Northwestern University and a bachelor's degree in computer science from the University of Iowa.
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