How Important Is The Agriculture & Turf Segment To Deere?

by Trefis Team
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Deere (NYSE: DE) has two primary operating segments – Agriculture & Turf and Construction & Forestry Segment. Agriculture & Turf is the largest operating segment for Deere and accounts for nearly 70% of its overall revenue. The segment saw robust growth, with revenue growing by over 10% in 2017, as a result of a recovery in commodity prices, improved demand for its agricultural equipment, and a favorable sales mix. We expect the strong growth to continue in the future. We have created an interactive dashboard analysis of Deere’s revenue growth that shows how much of the company’s future growth is likely to come from its Agriculture & Turf segment. You can adjust the revenue and margin drivers to see the impact on the overall revenues and earnings from operations.

Increased Equipment Demand To Drive Agriculture & Turf ‘s Revenue

Deere expects further improvement in the Agriculture segment, as a result of agricultural mechanization in developing countries and increased demand for food due to a rising population. This should result in strong order activity – increased replacement demand and demand for new equipment. Further, its most recent acquisition of Blue River Technology should help farmers reduce costs by decreasing the use of herbicides, which could lead to increased demand for its crop spraying equipment and provide decent long-term benefits. In addition, the acquisition of King Agro should help farmers improve productivity, which should further increase the demand for its spraying equipment. We expect a positive outlook for Deere in the near term, driven by improving conditions of the agriculture market, and increased global food consumption, which will likely spur demand for its agriculture products.

As evidenced by the above charts, the Agriculture & Turf segment is likely to contribute significantly to Deere’s growth in the next few years. The company, with its string of acquisitions, is actively trying to deepen its penetration in the markets where opportunities are available, which could drive further growth over the long run.

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