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Iconic farming, forestry and construction equipment maker Deere beat third quarter earnings reported before the open Wedneday but $DE also cut guidance citing global risks, higher US dollar and higher raw materials and freight costs fueling higher expenses and uncertainty.

Deere China

Deere & Company NYSE: DE  Reported Earnings Before Open Wednesday

$2.14 Beat $2.13 EPS AND $8.7 billion Beat $8.46 billion forecast in revenue. 

Earnings 

Deere third quarter earnings fell to $2.14 a share as revenue grew 4.3% to $8.7 billion. Analysts consensus was for Deere earnings per share  to fall 7% to $2.13 with sales rising 1% to $8.46 billion, according to Zacks Investment Research. Deere last posted a quarterly EPS decline in February 2017, but EPS growth has slowed sharply in recent quarters.

Sales climbed 3% to $5.756 billion in the core agriculture and turf business and 8% to $2.947 billion in construction and forestry. Financial services, Deere's lending arm, had a 14% revenue gain to $971 million.

Deere & Company NYSE: DE

Market Reaction - Pre-market Pre-market 169.80 −6.85 (3.88%)

Highlights

The results reflected continued uncertainties in the agricultural sector. Many farmers remained cautious about making major investments in new equipment due to lingering trade tensions as well as difficult growing and harvesting conditions.

  • Sales in Agriculture & Turf rose 3% to $5.8 billion due to price realization and higher shipment volumes, partially offset by the unfavorable effects of currency translation. 
  • Construction & Forestry sales grew by 8% to $2.95 billion helped by higher shipment volumes and price realization, partially offset by the unfavorable effects of currency translation. 
  • Financial Services posted a 66% dip in net income to $90 million, mainly due to impairments and higher losses on operating-lease residual values and unfavorable financing spreads.

Deere Q4 2019 Earnings

Outlook

Deere sees 2020 net income of $2.7 billion to $3.1 billion, down from a prior target of $3.2 billion and 2019's actual $3.253 billion. It sees agriculture-related sales down 5%-10% with construction and forestry sales down 10%-15.

Wall Street was expecting Deere earnings per share of $11.09 and revenue of $35.99 billion, per Zacks.

"Lingering trade tensions coupled with a year of difficult growing and harvesting conditions have caused many farmers to become cautious about making major investments in new equipment," Deere CEO John May said.

The Wirtgen acquisition

Deere Wirtgen

The Wirtgen aquistion last year 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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