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Riding High: Deere Had a Stellar Performance in 2Q17

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Riding High: Deere Had a Stellar Performance in 2Q17 PART 1 OF 5

Deere’s Earnings Beat Estimates in Fiscal 2Q17

Deere’s fiscal 2Q17 earnings

Deere (DE) announced its fiscal 2Q17 earnings on May 19, 2017, before the market opened. Deere reported EPS (earnings per share) of $2.49 and beat analysts’ estimate of $1.67. Deere’s 2Q17 EPS rose 59.6%—compared to EPS of $1.56 in fiscal 2Q16.

Deere&#8217;s Earnings Beat Estimates in Fiscal 2Q17

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What drove Deere’s earnings?

Deere’s 2Q17 earnings were primarily driven by higher volume growth, better price realization, and a significant gain from the sale of a portion of interest from SiteOne Landscape Supply. A reduction in the cost of sales also contributed to Deere’s earnings growth. Deere’s cost of sales during 2Q17 stood at $5.44 billion—compared to $5.53 billion in 2Q16. As a percentage of sales, Deere’s cost of sales stood at 65.70% of its total revenue in 2Q17—compared to 70.2% of its total revenue in 2Q16. Its total revenue fell by 4.5 percentage points year-over-year.

Stock price reaction

With Deere’s earnings beating analysts’ estimate and stronger guidance provided by management for the rest of the year, Deere’s stock price rose 8% on May 19, 2017. On the same day, Caterpillar (CAT), AGCO (AGCO), and CNH Industrial (CNHI) rose 2.2%, 3.9%, and 5.5%, respectively, while the broad-based SPDR S&P 500 ETF (SPY) rose 0.65%

Outlook

Deere made an upward revision to its earnings for fiscal 2017. Earlier, the company provided guidance of $1.5 billion. Now, Deere expects its earnings to be $2.0 billion for fiscal 2017.

In this series, we’ll discuss Deere’s fiscal 2Q17 earnings in detail along with the reporting segments’ revenue. We’ll also analyze analysts’ latest recommendations for Deere after its 2Q17 earnings.

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