Deere (DE) Stock Rises on Monosem Acquisition

Deere (DE) stock increases in late afternoon trading on Monday, following the company's agreement to acquire "precision planter" company Monosem.
By Rachel Graf ,

NEW YORK (TheStreet) -- Deere (DE) - Get Report stock is higher by 3.09% to $80.41 in late afternoon trading on Monday, after reaching an agreement to acquire Monosem, the European market's leader in "precision planters," which boost crop production.

The deal covers Monosem's four units in France and two in the U.S.

Deere will benefit from expanded market reach in precision planting equipment and further engineering expertise for developing planting technology, according to a statement.

Financial details of the deal were not disclosed, but the companies hope to close the transaction in the fiscal 2016 first quarter that began on November 1, according to Reuters.

Manufacturers such as Deere, AGCO and CNH hope that customers will value precision farming capabilities as demand for machinery declines with the farming economy, Reuters adds. The companies have invested millions in precision planting products.

Separately, TheStreet Ratings team rates DEERE & CO as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

We rate DEERE & CO (DE) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its respectable return on equity which we feel is likely to continue. At the same time, however, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and generally higher debt management risk.

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 20.3%. Since the same quarter one year prior, revenues fell by 20.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. When compared to other companies in the Machinery industry and the overall market, DEERE & CO's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • Net operating cash flow has decreased to $1,346.50 million or 11.06% when compared to the same quarter last year. Despite a decrease in cash flow DEERE & CO is still fairing well by exceeding its industry average cash flow growth rate of -32.09%.
  • The debt-to-equity ratio is very high at 4.81 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • The gross profit margin for DEERE & CO is currently lower than what is desirable, coming in at 31.06%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of 6.73% trails that of the industry average.
  • You can view the full analysis from the report here: DE
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