Wednesday, November 3, 2021

About That John Deere Contract -- November 3, 2021

John Deere's unions did not agree to new contract offers which included an $8,500-one-time signing bonus. Do they have a legitimate "gripe?"

Deere has 70,000 employees; not all of them union.

A one-time bonus of $9,000 per employee = $630 million, a bit over one-half billion dollars. 

Deere's:

  • cash flow: $7.74 billion
  • total cash: $7.03 billion
  • P/E: 19.61

Deere has 310 million shares outstanding:

  • earnings per share: $17.24 / share
  • 310 million x 17.24 = $5.34 billion
  • if that one-time bonus was subtracted "immediately" from earnings:
  • $5.34 billion - 0.630 billion = $4.71 billion
  • $4.71 billion / 310 million = $15.19 / share
If this is a five-year contract:
  • 5 x 310 million x 17.24 = $26.7 billion
  • $26.722 billion - 0.630 billion = $26.72137 billion
  • $26.72137 billion / 1.55 billion = $17.24 / share.

I'm not going to do the math, but the union could probably argue for a one-time signing bonus of $20,000 vs the proposed $8,500 bonus.  

An investor could have bought 1,000 shares of DE on March 1, 2020 for $138,000.

Yesterday, 1,000 shares of DE were worth $355,000. 

That's in one year. Without the dividend. 

This will be fascinating to follow. 

Management has options; it will be interesting if the CEO / board of directors can think outside of the box.

2 comments:

  1. Guess we'll see who blinks first. Kind of expensive to stay out on strike and it will take a while to recoup lost wages..
    "Strike pay will be available for Deere employees. According to the UAW, weekly strike pay is $275 per week, or $55 per day, beginning on the eighth day. A bonus check is paid the week prior to the Thanksgiving and Christmas holidays."

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    Replies
    1. Exactly what I was thinking. Years ago, we had a close friend, paid well, but employees went on strike --- became a prolonged strike -- he said then, that generally every time they went on strike, took about two years to recover.

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