Kubota (KUB) may be best known for its line of agricultural tractors. However, this Japanese manufacturer makes a range of construction and agricultural equipment, plus a line-up of infrastructure-related products. Kubota could be an alternate investment pick to competitors Deere (DE) or Case-New Holland (CNH).
The company divides its products into three main segments: agricultural and industrial equipment, water and environmental systems (pipes and valves), and “social infrastructure” (various types of equipment, castings, and steel pipe). Equipment sales account for about three-quarters of revenues; water and environmental chip in 15 percent; and social infrastructure just under 10 percent.
Kubota's 2012 fiscal first quarter ended on June 30 with revenues increasing year over year by 19 percent to $2.69 billion from $2.25 billion in dollar terms. Net income per ADR for the quarter was 66 cents, up from 48 cents a year earlier. Net income for full year 2011 was $2.59 per ADR.
Kubota generates a few percentage points more than half of its revenues from sales outside of Japan. International sales allow the company to continue to grow revenues despite a stagnant economy at home. A weakening yen helps sales and profit numbers when converted to dollars for U.S. ADR investors. Of the 19 percent sales gain recently reported, half was due to the change in the dollar-yen exchange rate.
Nevertheless, Kubota is lightly followed in the United States. Just one analyst follows the stock and only 2 percent of the ADR shares are held by institutions. KUB is definitely a stock for investors who do not like to follow the herd. Someone looking for a Japan investment based on currency exchange projections may be interested. KUB is at two-thirds the P/E ratio of Toyota (TM), for instance. The company reports next on Nov. 2.
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