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What to Know before Deere & Company's Fiscal 4Q16 Earnings

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What to Know before Deere & Company's Fiscal 4Q16 Earnings PART 1 OF 8

What Does the Market Expect from Deere’s Fiscal 4Q16 Earnings?

Deere to declare its fiscal 4Q16 earnings

Deere & Company (DE), the world’s largest manufacturer of tractors and harvesting combines, is scheduled to declare its earnings for fiscal 4Q16 on November 23, 2016.

Analysts expect Deere to post adjusted earnings per share (or EPS) of $0.40 in the quarter. Year-over-year (or YoY), this represents a fall of 62.5%. Based on the same consensus, its revenue is expected to fall 8.3% to $5.4 billion.

What Does the Market Expect from Deere&#8217;s Fiscal 4Q16 Earnings?

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Among Deere’s competitors in the agriculture (DBA) and construction (ITB) equipment space, AGCO (AGCO), CNH Industrial (CNHI), and Caterpillar (CAT) declared their 3Q16 earnings on October 26, October 31, and October 25, 2016, respectively. CNHI’s and AGCO’s agricultural equipment revenues fell 3% and 3.5%, respectively, in the quarter.

However, these numbers cannot be used to predict Deere’s agriculture equipment sales due to their differing geographical exposures. Deere derives 66% of its revenue from the United States and Canada, and it’s also the market leader in both countries. AGCO and CNH Industrial, on the other hand, make ~22% and ~26% of their respective revenues in the United States. Thus, a slump in US farm equipment sales affects them less severely.

Expect lower buybacks from Deere

Given that the downturn in agriculture equipment sales is now moving toward its fourth consecutive year, Deere’s maintaining its single ‘A’ rating from Standard & Poor’s (SPGI) is expected to take precedence over decisions related to its cash utilization. 

Deere has spent $10.5 billion since to 2011 to buy back 26% of its shares. Compared with the last few years, the company’s buybacks this year have been negligible.

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