Deere & Company - Farm and Construction Machinery

1. Deere & Company - Farm and Construction Machinery Bill Dailey 03/23/2014

2. Deere & Company • Segments • Agriculture and Turf - $29.1B • Construction and Forestry - $5.9B • Power Systems (engines) • Parts and Services - $682M • Financial Services - $2.1B • 2013 • Income of $3.54B on revenues of $37.8B • Third consecutive year of record earnings, eighth time in last ten years • Quarterly dividend increased by 11% to $1.99/share

3. Company Comparisons • Caterpillar is most similar • Both have financing operations • Caterpillar’s revenues come mainly from their construction and mining divisions • Joy Global • Operates in the mining industry • Much smaller revenue numbers • Komatsu • Operates mainly in the construction industry • Very small portion in the farming industry • Tractor and Agriculture Machinery Manufacturing • Deere holds 40%, followed by CNH Industrial with 11.7%

4. Cost of Enterprise Capital

5. Assumptions • Sales Growth Rate • Net Sales and Other Income - 2.0% • Stagnant growth in the beginning due to sale of JD Landscapes • ‘Eyes on the Horizon’ initiative - $50B in sales by 2018 • Finance and Interest Income - 5.0% • Successful portfolio of receivables • Low level of uncollectable accounts • Enterprise Profit Margin (EPM) - 10.5% • Leaders within the agriculture industry - pricing premium • Enterprise Asset Turnover (EATO) - .85 • Increasing the size of the financing portfolio • Attempting to localize manufacturing - 7 new factories in 2013

6. Value Estimate

7. Market Value of Debt

8. Sensitivity Analysis

9. Dividend Discount Model

10. Dividend Discount Model

11. Residual Income Model

12. Residual Income Model

13. Long-Term Growth - RI

14. Long-Term Growth - Earnings

15. Future Analysis • Further analyze analyst reports • Predicting a decrease in sales in upcoming years • Look into growth of financial services revenue relative to manufacturing operations • Incorporate Q1 2014 numbers into model

16. Questions?