Deere & Company DE has divested its crop insurance unit to West Des Moines, IA-based Farmers Mutual Hail Insurance Company (FMH), as agreed upon in Dec 2014. The sale includes both John Deere Insurance Company and John Deere Risk Protection, Inc., which together made up the business unit.
Deere has been involved in the crop insurance business for nine years. The business underwrites policies through John Deere Insurance Company, a business unit within John Deere Financial. In Sep 2014, Deere planned to review strategic options for the crop insurance unit to focus on its core businesses owing to price declines and falling demand which made the business less profitable.
Deere will continue to design, manufacture and offer technology, equipment and services in its precision agriculture offerings. Notably, effective risk management remains an important factor for the company’s operations.
In order to strengthen its core business Deere announced workforce adjustments at several factories in Iowa and Illinois in Jan 2015. The actions include indefinite layoffs at five locations as well as an extended inventory adjustment shutdown at a factory. In addition, the company declared that it has added new jobs at two locations that build construction and forestry equipment.
Deere has been persistently shedding its non-core assets in order to become a more focused and profitable company and has completed the sale of its irrigation unit and a majority interest in its landscape operations. Simultaneously, the company has been prudent in its manufacturing operations as it continues to adjust production levels according to demand.
The company also announced an expansion of its product engineering center in Iowa as it has always been committed to research and development of new and improved technologies and products. Deere spent $2.5 billion on R&D and capital projects in 2014. The company introduced some agricultural products in 2014 including four wheel drive tractors and planters that can double field speeds and maintain accurate planting.
Long-term outlook for Deere remains strong on the back of increased global demand for food, shelter and infrastructure. While, in the near term, even though net farm income remains at high levels, farmer sentiments regarding capital goods purchases are becoming more conservative due to lower commodity prices.
Moline, IL-based Deere is engaged in the production and distribution of agricultural and forestry equipment, construction equipment and engines worldwide. The company sells products in the U.S. and Canada through branch offices as well as through distributors and operates through dealers to resell products internationally.
Deere currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include AO Smith Corp. AOS, Astec Industries, Inc. ASTE and Bemis Company, Inc. BMS. All of these stocks carry a Zacks Rank #2 (Buy).
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