Deere Expected to Stay on Growth Course -- Earnings Preview
August 17 2017 - 1:09PM
Dow Jones News
By Bob Tita
Deere & Co. is scheduled to release its fiscal third-quarter
earnings before the market opens Friday. Here's what you need to
know:
EARNINGS FORECAST: Wall Street analysts expect earnings per
share of $1.95, up from $1.55 last year, according to Thomson
Reuters. The farm and construction-equipment maker didn't provide
third-quarter profit guidance, but in May raised its profit
forecast for the year ending Oct. 31 to $2 billion, which would be
33% above 2016's profit. Analysts expect the company to earn $6.42
a share this year, up from $4.81 in 2016.
REVENUE FORECAST: Third-quarter equipment sales of $6.9 billion
are expected, up from $5.9 billion last year. Analysts anticipate
sales of farm and construction equipment will climb about 9% in
fiscal 2017 to $25.5 billion, in line with the company's forecast
in May.
WHAT TO WATCH:
MIXED MARKET:
Industrywide retail sales of high-horsepower tractors in the
U.S. and Canada reported by the Association of Equipment
Manufacturers were down 20% in Deere's fiscal third quarter,
compared with a year earlier. Weak commodity prices and farmers'
reluctance to take on equipment debt are holding down equipment
purchases. Tractor demand in Brazil fared better in the quarter.
Factory shipments of new tractors industrywide rose 7% from last
year, according to trade association figures. Rebounding demand for
machinery in Brazil lately has some analysts wondering whether
farmers have simply moved up next year's purchases to 2017 to take
advantage of government-sponsored financing for farm equipment. If
that's indeed the case, a market slump could follow next year.
STILL GREEN SHOOTS: For the third straight quarter proceeds from
the sale of Deere's SiteOne Landscape Supply distribution business
are expected to boost earnings. The sale has added about 75 cents
to earnings per share this year, according to J.P. Morgan, noting
the SiteOne proceeds will make a tough comparison for 2018's
earnings.
DEAL UPDATE: Expect analysts on the conference call to probe
Deere executives for details about the purchase of Germany's
Wirtgen Group in June for about $5 billion. The road paving
equipment manufacturer is the largest acquisition in Deere's
history. The deal, which Deere nurtured for a decade, expands the
geographic reach and product lines of the company's construction
equipment business, which accounts for about a fifth of Deere's
sales. Deere is attempting to complete the purchase by the end of
December.
BULL RUN: Deere's stock price is up 21% since the start of the
year, more than double the growth rate of the broader market
S&P 500 index. Since the company's fiscal second-quarter report
in May, the stock is up 13%. Investors have been piling into Deere
as the company continues to report that the three-year-long slump
in farm equipment sales is starting to ease. It's unclear though
whether the farm economy is strong enough for a full-scale rebound
in equipment demand. Farmers remain cautious about capital
purchases and Deere's sales in recent years have been helped by
aggressive use of equipment leasing.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
August 17, 2017 12:54 ET (16:54 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Deere (NYSE:DE)
Historical Stock Chart
From Mar 2024 to Apr 2024
Deere (NYSE:DE)
Historical Stock Chart
From Apr 2023 to Apr 2024