NEW YORK (TheStreet) -- Shares of Deere & Co. (DE) - Get Report were falling 3.5% to $74.98 on heavy trading volume Thursday after fellow machinery company Caterpillar (CAT) lowered its 2015 guidance and announced job cuts.
Caterpillar said it now expects revenue of $48 billion for 2015, down from its previous guidance of $49 billion for the year. The company expects 2016 revenue to fall 5% compared to 2015.
Caterpillar also announced plans to cut operating costs by about $1.5 billion annually. The company will cut between 4,000 and 5,000 jobs by the end of 2016, with job cuts potentially reaching 10,000.
News of Caterpillar's lower guidance and job cuts helped bring down shares of other machinery companies include Deere, Joy Global (JOY), and Cummins (CMI).
About 3.9 million shares of Deere were traded by 11:55 a.m. Thursday, above the company's average trading volume of about 3.3 million shares a day.
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:
- DE, with its decline in revenue, slightly underperformed the industry average of 14.4%. 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 of 11.06%, DEERE & CO is in line with the industry average cash flow growth rate of -14.04%.
- 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