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Iconic farming, forestry and construction equipment maker Deere missed 2nd quarter earnings Friday . $DE beat on revenue but higher raw materials and freight costs saw expenses surge.



Deere Wirtgen

Deere & Company NYSE: DE Missed Earnings Before Open Friday

 $2.59 Missed $2.77 EPS But $9.29 billion Beat $9.17 billion forecast in revenue. 

Earnings 

Net income grew to $910.3 million or $2.78 per share included a tax benefit compared to $641.8 million or $1.97 per share in the prior-year period. Adjusted net income was $849 million or $2.59 per share. EPS missed the forecast $2.77, but beat expected revenue of $9.17 billion. Revenues were $9.29 billion, up 32% from the same period last year helped by strength in key markets.

Deere & Company NYSE: DE

Market Reaction - Pre-market $133.15 −$4.20 (-3.06%)

“Farm machinery sales in North America and Europe made solid gains, while construction equipment sales moved sharply higher and received significant support from our Wirtgen road-building unit. At the same time, we have continued to face cost pressures for raw materials and freight, which are being addressed through a combination of cost management and pricing actions,” said CEO Samuel Allen.

DE Earnings Q2 18

Highlights

  • Worldwide net sales and revenues of $10.3 billion, up 32% from the same period last year.
  • Equipment net sales rose 36% to $9.3 billion, helped by strength in key markets.
  • Costs and expenses rose to $9.1 billion versus $6.9 billion in the prior-year quarter.
  • Performance in the third quarter benefited from favorable conditions for agricultural and construction equipment as well as the Wirtgen Group acquisition.
  • The Wirtgen Group acquisition added 17% to net sales for the quarter.
  • Farm machinery sales saw good gains in North America and Europe 
  • Construction equipment sales posted significant increases.
  • Equipment net sales in the US and Canada rose 29% for the quarter while outside the US and Canada, sales rose 45%.

Guidance

  • Deere & Company expects equipment sales to increase by about 21% for the fourth quarter of 2018 and by about 30% for the full year of 2018 compared to the respective same periods in 2017.
  • Net sales and revenues for full-year 2018 are expected to grow around 26%. GAAP net income is expected to come in at $2.3 billion while adjusted net income is expected to be $3.1 billion.
  • Worldwide sales of agriculture and turf equipment are expected to increase by about 15% for fiscal-year 2018 while for construction and forestry equipment, sales are expected to grow about 81%. In 2018, net income for financial services is estimated to total approx. $815 million.

 The Wirtgen acquisition has expanded $DE into the road construction business that is in a position to gain massively from President Trump's infrastructure spending plans. 

Competitors include Caterpillar (CAT), Manitowoc (MTW) and Terex (TEX).

Source: Deere, AlphaStreet

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