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JD reports six straight quarter of lower earnings

Bruce from Can.

Bruce from Can.

Well-known Member
Location
Woodville, Ontario, Canada
Analysts suggest that trade disputes which are impacting agricultural exports and depressing farm income are at the root cause for JD sales drop, and a dip in earnings. In the Global economy, I have to wonder just how dependent companies like JD are on North American sales ? JD equipment is very popular through the western world, but Ag prices worldwide are in the dumps. How long can a Ag company like JD take this kind of down turn?
 
I agree ag prices are in the dump and that affects companies as well.
Another reason JD has problems is their cost. I love green paint but when I can buy Case IH for 10's of thousands cheaper....I now have red paint.
 
SETX I agree. Running on their laurels for a long time. You pay or you don't get one. I feel one really big thing is how you guys complain how they will not let you play with the electronics. Not like you can run down the street to the local autorama parts store. Still think it is a a monopoly. So sad you can't just grab a screwdriver and a pair of pliers. Now you have anti tampering screws.;)
 
US exports of soybeans to foreign countries dropped 74% in the last 12 months. This directly reduced market prices and then income to farmers.They don't have the income to buy new equipment, just keep the older stuff repaired now. Trade relationships have been damaged. Deere can do layoffs to get thru this, likely a prolonged time period.
 
The key words here are earnings instead of losses. Of course this has an impact on stock prices and the ability to attract investors to keep the stock price up. Deere learned that diversity is the key to survival many decades ago when it got deep into financing, industrial lines, and consumer products. Deere can weather a down period for a while. I hate the consolidation on the dealer level but this no doubt allows them to better manage inventory and factory schedules. I hope I live long enough to see a time where big is not always better on the farm front and the equipment manufacturer front but I am not holding my breath on it. Some dealers are starting to note the consequences are big when a farm customer up and switches loyalties because the farms are so big when it comes to whole goods. I remember years ago some dealers preferred mid-sized farm customers and noted that there was safety in numbers. A neighborhood of 6 300 acre farms does not seriously impact business if one changes allegiances or sells out but one 1800 acre farm reduces things to an all or nothing situation for that neighborhood and that dealer territory.
 
I wouldn't lose much sleep worrying over John Deere, they're an international company with about 70 billion in assets and made about 3 and 1/2 billion in profits last year, ranked 194 on Forbes top 200 companies.

JD
 
Doesn?t help that a lot of the mid sized farms looking for tractors in the 200-250 horse range are getting really tired of dealing with tier 3 and 4 reliability and maintenance issues. That?s the majority of the reason the market on nice late model equipment is going nuts. Even nice late model 4 wheel drives have been going up.
 
Bingo, Oliverkid!

It remains to be seen if the US becomes the first super power to commit economic suicide, but things are looking less depressing recently.

Dean
 
Did you worry much about GM?

Did you worry much about US Steel?

Did you worry much about AC?

Did you worry much about GE?

Among other things, federal regulations, written by 30 year olds (think AOC), sitting in a cube somewhere in DC, can change international competitiveness overnight.

Dean
 
I'm not worried about JD too much. I've read the comments so let's just address some Chrysler had been losing money for several years and so had GM--going under was expected and the companies were not doing much. Earnings are important REALLY count when they go negative. All of the companies mentioned were/are international. What really counts IS THE COMPANY LOSING MONEY! If profits are just down then corrections are in order if the company is serious. Attitudes need to be adjusted staff needs need to be addressed. And is the product meeting to needs of the customers. I don't think JD is serious yet and the stock price will reflect it. Demanding the dealer to maintain a particular showroom and inventory isn't to help. Trying to insist that the customer come to the dealer for service (both hardware and software) without providing the service personnel and materiel to satisfy the customer will just accelerate the slide. Is JD doing anything to turn the slide around?

BTW JD isn't alone in this approach to business, Look around and see how many are tacking the attitude that the business is boss and see if they aren't losing their shirts. I'm not talking about businesses big things like farm equipment, cars and ships but companies selling little things like toasters.

The customer is KING and when JD and the companies like JD realize it changes will come!
 
Earnings going down happens -the company remains profitable. If you recall most of the others you listed had record losses leading up to their demise or bailout.
 
Ag has been down for a couple years. I would suspect this decline in revenues is related to their construction equipment sales. Considering 2018 was a record year in revenue a decline shouldn't be a shocker.
 
Company's play with the numbers so much there is no telling what is really happening.

If Deere planned on making 60 billion & they only made 55 billion they lost 5 billion. They can do it every year from now on. The difference between projected income and loss or gain is normal business practice on whether they are profitable.

I spent 19 years at an old company that told the employees every year they lost money. After the old owner died and the son decided to close the truth was finally revealed in a newspaper article. The plant had ran at a profit for over 80 years, even though the depression & 1957 was the only year they lost a dime. All those years they planned to make more didn't count then.
 
A few weeks ago the smear news was reporting that they'd gotten a hold of nnalert's tax returns from the 80's and 90's and that he lost a billion dollars (mostly of other people's money) and didn't suffer a reduction in "lifestyle". A big company's loss ( or a real estate developer's loss) might not be what the average person would feel is a loss. Part of that loss was deprecation, a guess at the reduction of value that assets they have incurred in the normal conduct of business. Also is that loss is research and development expenses and on anything they sold for less than it's book value. Let's look at an example of what can be a loss, say they have an assembly line all set up to make a piece of equipment. Let's assume that they have run this line for 5 years and made $5,000,000 each year they ran it. They decide to shut down the line and scrap it out. Their book or residual value of the line may be $1,000,000 meaning they have written off all but $1,000,000 of what they spent to build that line. They scrap the line and get $250,000 so they have a loss of $750,000 dollars, yet over the last 5 years they made $25,000,000 on this line, but for this year they can declare a loss of $750,000. But they could also have the opposite they close the line and scrap it, same $1,000,000 book value but they sell the line for $1,250,000 so they have a $250,000 profit but since it's a sale of a capital asset they are taxed on capital gains rather than regular income so there is some advantage in taking more depreciation than you incurred. As other have eluded to they didn't necessarily "loose" money they didn't meet their target, the report it the sixth straight quarter of lower earnings as opposed to six straight quarters of loss. It is not unreasonable for them to have lower earnings or even a quarterly loss if business is slow or they're tooling up for new products or shutting down older lines. Also remember that the government has allowed companies to accelerate their depreciation, to take more depreciation than they incurred as a way of stimulating business. Remember some of the tomfoolery that occurred in places like Enron where they sold assets and declared a profit on the sale but pushed the unrecovered value or book value into the remaining assets until they had very little left with exceptional value like bolts and other bits of left over construction material worth a few thousand dollars on the books for millions. But heck if we're Farmers or any kind of businessmen we should know and understand all of this.
 
The key words are "lower earnings". JD is still making money, it just is not as much as they wanted/expected. JD and other agriculture companies are coming off of an extended HIGH market. They had a 7-8 year run of record high earnings and volume. So they are crying wolf to a large degree.

I have over 30 years of dealing with JD management. They will make money one way or another. The ones standing in the gun sights are the JD dealership owners. JD gets paid or your toast. Makes no difference if your doing a good job or not JD gets paid the tenth business day of each month or your closed. I think that these mega dealerships are going to get an education dealing long term with JD. The people that they deal with at JD rarely have any skin in the game. The majority of the management chain at JD has nothing of their own invested in JD or the general agricultural economy. I owned JD stock until two years ago. I asked around at company meeting over the years and there where darn few that ran things on either side that had anything personally invested. So there is a massive disconnect from reality with a lot of them.

Also in the last ten years the average JD tractor or combine price has increased an average of 40%. There is all kinds of fat built into those numbers. Now that the farmers are not rolling in the gravy of high grain prices those price increases will reverse or JD will lose more market share. The high flying farmers are the ones with the majority of the new equipment debt. Many of them will be the first to have economic set backs or simply fail. This same group is the one JD chose to cozy up to. So I feel they deserve each other.

JD needs quarters of HUGE loses to wake them up to how they have messed up their brand to a lot of Green blooded farmers.

Here are some hard numbers. In the last two years we have reduced our parts purchases of JD parts, 60%. We look to other venders first now, where before many times we used the JD stuff just because it was handy and usually good quality. We now look at quality and price.
 
No, they did not loose 5 billion. Only government does things that way.

That said, a corporations stock valuation is heavily influenced by expected future earnings. If future guidance is reduced, stock prices will decline.

This is one of the major reasons that large corporations hire highly experienced EEOs, CFOs, etc., as such folks are more likely than others to be able to speak to Wall Street in ways that minimize stock devaluations (or maximize increases) while, at the same time, keeping themselves out of trouble with regulators and (especially) pols.

Dean
 
Unless you are dealing with a CEO or someone on the board of directors, I doubt that you will find any employees that own a significant potion or amount of their employeer's stock. The amount of stock owned by all the employees combined may not be more than a few percent of the total company stocks.

Most financial advisors advise against investing in your employer because when the company hits hard times you may find yourself out of a job at the same time your company stock holdings are only worth a few pennies on the dollar of what you paid for it. Retirement plans may offer company stock at a discount, but it is wise to sell it as soon as it is allowed.
 
I don't think JD will hurt that badly, as a global corporation. Last report on RFD tv, about a week ago, stated that China, from sept. to the present had bought 12% of the soybeans from the same period year before. Also said US sales to foreign markets for beans were down about 36%, I know the numbers are always sketchy but I don't think there is any way that they could be down 70 plus. But many other farm products are seeing some export downturn. China has made it through a season without US beans. They may well be able to continue. It took decades to develope those markets. But lost in a short period. Now for those folks thinking China has to make a deal. Why would they knucle under to someone that they, and much of the world now views as an unreliable trading partner? I understand what many see as the long term benefit, or revenge on China, but could be American farmers will continue needing bailout money, should it continue to be available.
 
A number of corporations are issuing statements about how the tariffs and trade war could/will affect their earnings and how they need to raise their prices now in the face of potentially rising tariffs, potentially raising inflation and stagnating the US economy in 2020, much like the stag-flation of the 1970's. Some of those statements are actually registering in Washington this week and have put some pressure on our leaders and on Congress to tone down the rhetoric and to be realistic in our trade negotiations. Hopefully the cooler heads will prevail.
 
The Gov't and soybean producers need to get real and face the fact that there is tremendous over production.Selling beans to China costs the Taxpayers a lot of money overall and benefits a very small segment of the population of the USA.And they certainly should not be dictating trade policy.This 'Feed the World' stuff is a bunch of B-S conjured up
by the big ag companies and their propaganda mouth pieces on places like the weekend farm shows.Let the market shake out on its own like any other businesses do when there is
an over supply of production.
 
I am in agreement with you. However we are about to add more taxpayer subsidized dollars for the benefit of a small portion of voters. One thing I do believe is that China has no interest in making a deal until after 2020. Why would they?
 
You are not living in the real world. Chinese people have endured famines that made our great depression look like an ice cream social. But just keep believing and see what happens. While we vote, they have a leader for life, but his life may be short if he is seen to be weak. The same folks that made him can make another.
 

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Farmers make part of there cropping decisions based of market prices which will produce income for them. So they have a a period of years of good prices for say soybeans, they gear up to produce that commodity, put it into their crop rotation then as the chart shows the rug is pulled out from under them as relates to China export market essentially drys up.......vaporizes into nothing. We become unreliable trade partners the trust of which took years to build up.Don't see this as a farmers fault , all they are doing is following market signals, until an unforeseen market collapse happens. This evaporation of a china export market affects Deere. Their new combine sales are down 37% in one year. Their stock valuation dropped 7 % in one day on 5/17/19. They will survive because of their many divisions like construction,lawn & garden, and billions in worldwide ag sales. Many farmers may not.
 
Looks many producers of corn and soybeans don't understand the way things work as far as prices.Corn and beans along with many other commodities are traded(priced) every day at places
like the Chicago Board of Trade.Prices are subject to markets changes,politics,weather etc etc.Corn and beans are no different from oil,copper,hog futures etc etc.There is
no "rug" to be pulled only market pricing,there are no guarantees as far as prices never have been,never will be.In my opinion anyone solely relying on a commodity like
soybeans or corn for their whole lively hood is taking a tremendous financial risk and need to realize it.
 
"Deere learned that diversity is the key to survival " This comment from a guy whose screen name references a company long gone that was way
more diverse than anything Deere has done or imagined. Thank you for the chuckle,you beat Jonf today !
 
So what happened to the this is a world market guys.

China buys bean from us and so and so buys beans from Brazil.
China stops buying beans from us and starts buying beans from Brazil.
Now so and so will be forced to buy beans from us since all the Brazil beans are going to China.

I vote we play the game like China does when we refused to buy their inferior honey.
Just ship our beans to a 3rd country and let them sell the beans that were ours to China.

And how does any of this effect John Deere sales.
They just need to ship their tractors to Brazil now rather than selling them here in the USA.
 
Given that soybeans can be grown in a lot of places, and the production of grain of all types is increasing in places like South America, and the Black Sea region, plus Europe and Russia, cutting off your customers won?t work well in the short run, and not at all in the long run. The simple fact is that we can grow way more corn, beans, wheat than what we have a market for. 8 dollar corn and 12 dollar beans may not occur for a very long time. The only long term solution is to let the market work. High cost production in fringe areas needs to go away. The subsidies just prolong the pain.

The high cost producers need to go away.
 
[b:654c4848f0]Seems like you are assuming that we are the only country that can grow soybeans[/b:654c4848f0]


How in the world did you come to that conclusion with what I said.

We stop growing soybeans and some other country will pick up the slack.
John Deere can then sell their soybean tractors to that country.

But why is there all of a sudden this big surplus of soybeans in this we feed the world market.
China stops buying from us and starts buying elsewhere there is all of a sudden going to be a shortage of beans from that other country. The people that were buying soybeans from that other country will have to come to us to buy now.

If anything you must think China is the only country buying soybeans.

Every farmer keeps saying "we feed the world".
Well sell your beans to the world; just not China.
 
There was a rug pulled out from under soybean farmers in July 2018 when politics was introduced into this market. Before that supply and demand governed the soybean export market & soybean prices without direct & sudden political intervention.
 
Well...Friday China caved and agreed to start buying US beef in exchange for the US to import China produced chicken. China had not imported US beef for fifteen years since the 2003 mad cow disease outbreak.

Who knows, maybe China is now weak enough that they will need to cave again and accept US soybeans in only ten short years from now.
 
Well, think of it this way. Traditional Farmer is right in respect to overproduction. And if other countries that can grow 2 crops per year swing in to high gear there has to be a glut. And if one of the biggest consumers of US farm products, including beans, does not buy from us. then we are the ones with the bins full. And mother Deere may sell their products worldwide, but losing a substantial amount of sales dollars here won't help. Other countries may prefer the price of a Fiat brand. Maybe even a Belarus. Something that can be repaired without all the electronic failures. At any rate we are on this path and probably cannot back up now. Just have to see what happens.
 
(quoted from post at 06:46:20 05/18/19) There was a rug pulled out from under soybean farmers in July 2018 when politics was introduced into this market. Before that supply and demand governed the soybean export market & soybean prices without direct & sudden political intervention.
Click to expand...

Sort of like NAFTA.... the winners were the ag guys, they got more market access. A lot of little people got unemployment.
 
Please be quiet about soybeans or the government will build another 10 billoin dollar plant to turn them into
ethanol like they do with corn, our gasoline already destroys most air cooled equipment, even with stabil or other expensive additives.
 
(quoted from post at 09:27:24 05/18/19) Please be quiet about soybeans or the government will build another 10 billoin dollar plant to turn them into
ethanol like they do with corn, our gasoline already destroys most air cooled equipment, even with stabil or other expensive additives.
Click to expand...

I don t know about ethanol, I haven t studied it. I do find it interesting that some AG guys are promoting it, at a time when electric vehicles are going to decimate the fossil fuel industry. If you doubt that is going to happen, look at the Big oil companies. Their stocks are trading much lower than they would otherwise.
 
(quoted from post at 11:27:24 05/18/19) our gasoline already destroys most air cooled equipment, even with stabil or other expensive additives.
Click to expand...

Really, my chain saw and weed wacker don't know that and I won't tell them.
Never have bought into the stabil Bull Patty.
 
Politics has been in the market for years that is why the Red Chinese were buying the beans in the first place.Having the Red Chinese as your buyer was about like dealing with a
Rattlesnake sooner or later you were going to get the nasty end of the deal.No one is owed a market for what they produce.
 
You are right about that. Bailouts and subsidies inflate prices and stimulate even more overproduction. We don't need to keep producing products that cost as much as they bring and expect the taxpayer to furnish the profit.
 
I have been told in waterloo that deere is in deep trouble and they have dealers that owe them billions----Kubota and agco are both sitting on billions of cash----when deere trips they will be at the auction
 
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