Deere & Company (DE) Beats Q1 Earnings, Lowers 2015 Outlook - Tale of the Tape

Deere & Company (DE) is the world’s leading manufacturer of agricultural machinery with a market capitalization of $31.6 billion. It also produces a variety of commercial and consumer equipment; and a broad range of construction and forestry equipment. Deere’s financial services primarily provide credit services, which mainly finance sales and leases of equipment by John Deere dealers and trade receivables purchased from the equipment operations.

 

The company, best known for its John Deere tractors, has been challenged with falling demand for agricultural equipment as lower crop prices take their toll on the U.S farm income. Deere has thus resorted to production cutbacks, lay-offs, along with seasonal plant shutdowns to remain profitable in the wake of lower sales. On the contrary, Construction & Forestry equipment sales are expected to grow as the leading indicators for construction activity continue to trend up, boding well for Deere. However, considering that the segment contributed 18% to Deere’s revenues in fiscal 2014, pitted against the 73% contribution from Agriculture and Turf segment, the improvement will not be adequate to offset the latter’s weakness.

 

Investors have thus been eagerly awaiting the company’s latest earnings report. Let’s have a quick look at the Illinois-based company’s first quarter fiscal 2015 earnings release.

 

Upward Estimate Trend & Surprise History

 

Investors should note that the earnings estimate for Deere for the fiscal 2015 first quarter has been stationary over the past week and month. The Zacks Consensus Estimate has remained static at 83 cents over these periods.

 

Deere has outpaced the Zacks Consensus Estimate in the trailing 4 quarters with an average beat of around 13.13%. Investors have been eagerly awaiting Deere’s latest earnings report to see whether it maintains its momentum, starting fiscal 2015 with another positive earnings beat..

 

Earnings Ahead of Estimates

 

Deere raked in earnings of $1.12 per share, outpacing the Zacks Consensus Estimate of 83 cents by a wide margin of 35%. Strength in the construction and forestry business helped offset weakness in its agricultural business.

 

Revenues Came Ahead

 

Deere also beat on revenues. It reported first quarter revenues of $6.383 billion, surpassing the Zacks Consensus Estimate of $5.432 million.

 

Key Stats/Developments to Note

 

Deere projects total equipment sales to decline 17% year over year in fiscal 2015, down from the previous projection of a 15% dip. The company expects a 19% decline in equipment sales in the second quarter of 2015. Despite the effect of the continued weakness in the agricultural sector on its sales, Deere expects to remain solidly profitable in 2015 and projects net income of around $1.8 billion, lower than its previous guidance of $1.9 billion.

 

Zacks Rank

 

Currently, Deere has a Zacks Rank #3 (Hold) depicting the weak demand for agricultural equipment. However, this could change following Deere’s earnings report which was just released.

 

Market Reaction

 

Deere shares were down almost 0.71% in pre-market trading.

 

Check back later for our full write up on this Deere earnings report later!

 

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