Deere Stock Plummets despite 3Q17 Earnings Beat
Deere’s fiscal 3Q17 earnings
Deere (DE) announced its fiscal 3Q17 earnings on Friday, August 18, 2017, before the market opened. It reported EPS (earnings per share) of $1.97, beating analysts’ estimate of $1.91. Its 3Q17 earnings represent a rise of 27.0% on a year-over-year basis. In fiscal 3Q16, DE reported EPS of $1.55.
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The rise in DE’s earnings was primarily driven by higher volumes, increased prices, and gains from the sale of its partial interest in SiteOne Landscape Supply (SITE). Earnings also improved on the reduction of its SG&A (selling, general, and administrative) expenses as a percentage of total sales. Its SG&A expenses were $791.0 million, an 11.6% rise over fiscal 3Q16 at $709.0 million. However, as a percentage of sales, SG&A expenses in 3Q17 were 10.1% of the total revenue, while in fiscal 3Q16, they were 10.5% of the total revenue, implying a reduction of 40 basis points on a year-over-year basis.
Stock price reaction
Despite Deere beating analysts’ estimate for EPS, DE stock fell 5.4% on August 18 due to its revenue not meeting Wall Street’s expectations. On the same day, its peer Caterpillar (CAT) rose 0.70%. AGCO (AGCO) and CNH Industrial (CNHI) fell 1.8% and 0.50%, respectively. The broad-based SPDR S&P 500 ETF (SPY) also fell 0.20%.
Deere has increased its net income forecast marginally for fiscal 2017 to $2.07 billion. Deere’s earlier guidance was $2.0 billion.
In this series, we’ll take a look at Deere’s fiscal 3Q17 earnings in detail along with its reporting segments’ revenues. We’ll also analyze analysts’ latest recommendations for Deere after its 3Q17 earnings.