Deere Buys Auteq to Enhance Presence in Sugarcane Market - Analyst Blog

In line with its strategic focus on the sugarcane industry, Deere & Company (DE) has acquired Sao Paulo, Brazil-based Auteq Telematica. Auteq is an onboard software and computer company that also specializes in hardware support.

The Deere-Auteq association goes back to 2009, when they had created a joint venture to provide integrated, innovative technologies and solutions for sugarcane production. The acquisition will provide Deere additional specialization in the sugarcane market. The data produced by onboard computers will help customers enhance the performance and productivity of sugarcane plantations.

Even though Deere has fully acquired Auteq, the latter will continue to operate under the Auteq brand name. In Brazil, John Deere offers the sugarcane market two harvester models recognized as market leaders for high performance, savings, durability and harvesting quality.

Deere's fiscal 2014 earnings per share declined 13.3% year over year to $1.83 impacted by less favorable product mix, lower shipment and production volumes as well as higher production costs. In spite of continued pullback in the global agricultural sector John Deere expects to remain solidly profitable in 2015, reflecting its efforts to establish a more resilient business model.

Deere expects equipment sales to decrease around 15% year over year in fiscal 2015. For the first quarter of 2015, Deere projected a 21% decline compared with the year-ago period. Deere estimates its net income to be $1.9 billion for fiscal 2015.

Given the increased global demand for food, shelter and infrastructure, we believe that the long-term outlook for Deere remains strong. Global trends based on population growth and rising living standards remain intact and are largely unaffected by periodic swings in the farming economy. Meanwhile, Deere's plans for serving a larger global customer base are making progress.

Deere currently holds a Zacks Rank #4 (Sell). Better-ranked stocks in the same industry include Alamo Group, Inc. (ALG), Blount International Inc. (BLT) and Briggs & Stratton Corporation (BGG). All of these carry a Zacks Rank #1 (Strong Buy).

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