Deere & Co. Expects Strong Run In Third Quarter

Sat., Aug. 10, 1996

From Wire Reports

Moline, Ill. - Deere & Co. is expected to report a 12 percent gain in its fiscal third-quarter earnings, lifted by higher grain prices and government subsidies to farmers, analysts said.

The world’s largest maker of farm equipment will report net income of about $201 million, or 78 cents a share, in the quarter ended July 31, up from $180.1 million, or 69 cents, in the year-ago period, according to the average estimate of 15 analysts surveyed by Zacks Investment Research. Per-share figures are adjusted for a 3-for-1 stock split last November.

Deere will report its third-quarter earnings on Aug. 13.

“There is increased acreage planted, relatively high commodity prices and federal farm subsidy payments, all of which will lead to increased profitability for farmers and that bodes well for Deere,” said Kevin Kelly, an analyst at USAA Investment Management Co., a San Antonio, Texas-based fund management company that holds almost 2 million Deere shares.

A U.S. farm bill passed earlier this year replaces traditional farm subsidies with fixed but declining government payments totaling $36 billion over seven years to ease farmers into a more market-based farm economy.

This year, U.S. farmers are expected to harvest 9.12 billion bushels of corn, up 24 percent from last year’s harvest of 7.37 billion bushels.

The average price of corn, based on the contract closest to delivery on the Chicago Mercantile Exchange was $4.77 a bushel in the latest quarter, compared to $2.72 in the year-ago period.

“Grain prices are high in the face of what potentially could be the third-largest harvest in the country’s history,” said Jonathan Braatz, an analyst at Fahnestock & Co. “I doubt earnings will be below expectations and I doubt Deere will have any major concerns with the outlook going forward.”

Over the past year, Moline, Illinois-based Deere’s shares have risen 25 percent, topping the 19 percent rise by the S&P 500 and the 8.6 percent gain the S&P Machinery Diversified index.

Some of the stocks that moved substantially or traded heavily Friday on the New York Stock Exchange, Nasdaq Stock Market, and American Stock Exchange.

NYSE

Micron Technology, down 7/8 at 24-5/8

LSI Logic, down 1-1/8 at 22-5/8

National Semiconductor, down 3/4 at 15-1/2

Texas Instruments, down 1 at 46-3/4

Motorola, down 1-5/8 at 56-1/4

An indicator of semiconductor industry performance fell last month, reversing a gain in June that had bolstered hopes for speedier growth than seen earlier this year. The Semiconductor Industry Association reported late Thursday that its preliminary July book-to-bill ratio was 0.85 in North, Central and South America, the largest market for computer chips. June’s book-to-bill ratio, meanwhile, was revised to 0.88 from 0.91.

Hambrecht & Quist, up at 18-1/4 from initial offering at 16.

NASDAQ

Nordstrom, down 3-1/2 at 38-1/4

The Seattle-based retailer reported second-quarter earnings that fell well short of Wall Street expectations. Nordstrom attributed the earnings decline to larger-than-expected markdowns, the result of a realignment of its merchandise from department to department. After the report, Dean Witter Reynolds and Montgomery Securities lowered their ratings on the stock.

Quarterdeck, up 1 at 8-3/4

The stock rose for again on rumors that McAfee Associates might make an offer to buy the software-utilities maker.

The rumor took hold in the market Thursday, prompting a 14.8-percent rise in Quarterdeck stock. A column in the latest issue of Business Week repeating the speculation triggered an even stronger rise Friday.

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