Quick note from JPMorgan, regarding Deere Earnings, and what was said on the conference call:
Conf call takeaways. FQ2 performance was largely driven by strong NA ag equipment demand, although management noted early stages of recovery in other key markets—construction equipment in the U.S and farm machinery in Europe and the CIS. Production tonnage was up 27% in the quarter (vs. forecast of +26%). Management expects YoY tonnage to decline in the second half of FY’11 and incremental margins to be well below H1 (largely due to Tier 4 product transition as well as ERP implementation—neither of which was new news and already anticipated in our model). Raw material increases are expected to be about a 2 point headwind on margins, but with three points of price realisation it expects to more than offset the cost increases. Additionally, management expects SA&G costs to be up 14% YoY (vs. prior up 12%), R&D to be up 17% vs. FY’10 (vs. prior 15%), and pension/OPEB contributions to be $115MM (vs. prior ~$100MM). A&T margins are expected to be around 14% and C&F margins about 8%.
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