Fin 516

Topics: Stock, Finance, Weighted average cost of capital Pages: 13 (2813 words) Published: June 7, 2013
Fin 516 - Minicase - John Deere & Co



Deere & Company (NYSE:DE)|


A fundamental Analysis into the financial performance of Deer and Company (NYSE :DE ), better known as JOHN DEERE & CO.|


Deere & Company (NYSE:DE)

1. What is the name of the company? What is the industry sector?

Deere & Company also more commonly known as John Deere, along with its subsidiaries, operates in three segments: agriculture and turf segment, construction and forestry segment and financial services segment. The John Deere agriculture and turf segment manufactures and distributes a full line of agricultural and turf equipment and related service parts. John Deere construction, earthmoving, material handling and forestry equipment includes a broad range of backhoe loaders, crawler dozers and loaders, four-wheel-drive loaders, excavators, motor graders, articulated dump trucks, landscape loaders, skid-steer loaders, log skidders, log feller bunchers, log loaders, log forwarders, log harvesters and a variety of attachments. The financial services segment primarily finances sales and leases by John Deere dealers of new and used agriculture and turf equipment and construction and forestry equipment

2. What are the operating risks of the company?

John Deere being a global company has multiple factors that could be considered as operating risks for the company. Listed here are few of the risks.

* International, national and regional trade laws, regulations and policies (particularly those related to or restricting global trade) and government farm programs and policies, could significantly impair John Deere’s profitability and growth prospects

* Changing worldwide demand for food and for different forms of bio-energy could have an effect on the price of farm commodities and consequently the demand for certain John Deere equipment and could also result in higher research and development costs related to changing machine fuel requirements.

* As John Deere seeks to expand its business globally, growth opportunities may be impacted by greater political, economic and social uncertainty and the continuing and accelerating globalization of businesses could significantly change the dynamics of John Deere’s competition, customer base and product offerings

* Because the financial services segment provides financing for a significant portion of John Deere sales worldwide, John Deere’s operations and financial results could be impacted materially should negative economic conditions affect the financial industry

* The Dodd-Frank Wall Street Reform and Consumer Protection Act (Act), and the regulations implementing the Act, could impose additional supervisory, financial and reporting requirements and compliance costs on the Company and the Company’s financial services operations and could therefore adversely affect the Company and its financial services segment.

* John Deere’s equipment operations and financial services segment are subject to interest rate risks. Changes in interest rates can reduce demand for equipment, adversely affect interest margins and limit the ability to access capital markets while increasing borrowing costs.

* John Deere’s operations are subject to and affected by increasingly rigorous environmental, health and safety laws and regulations of federal, state and local authorities in the U.S. and various regulatory authorities with jurisdiction over John Deere’s international operations. In addition, private civil litigation on these subjects has increased, primarily in the U.S.

3. What is the financial risk of the company (the debt to total capitalization ratio)?

These numbers are based on John Deere’s financial statements for year ended Oct 31 2011.

Capitalization Ratio = Long term Debt / Long term debt + share holders equity

Long term debt = 16,959.90

Total Share holders Equity = 6,800.30...

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