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Deere's Fiscal 3Q17 Earnings: All You Need to Know

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Part 2
Deere's Fiscal 3Q17 Earnings: All You Need to Know PART 2 OF 5

Deere’s Revenue Sees Growth but Falls Short of Estimates

Deere’s fiscal 3Q17 revenue

For fiscal 3Q17, Deere (DE) reported total revenue of $7.8 billion, inclusive of financial services and other revenues. That implies a rise of 16.0% on a year-over-year basis. In 3Q16, DE reported total revenue of $6.7 billion. Excluding financial services and other revenues, DE’s net sales for 3Q17 were $6.8 billion compared to $5.9 billion in fiscal 3Q16, an increase of 17.0% on a year-over-year basis. However, for fiscal 3Q17, analysts expected sales to be $6.9 billion from equipment operations, thus falling short of expectations.

Deere&#8217;s Revenue Sees Growth but Falls Short of Estimates

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Deere’s revenue growth for the quarter was primarily driven by higher prices and higher volumes across the region. In the United States and Canada, equipment sales rose 11.0%, while sales outside the United States and Canada saw robust growth of 25.0% on a year-over-year basis due to improving market conditions around the world.

Samuel R. Allen, Deere’s chair and CEO (chief executive officer), said, “John Deere reported another quarter of strong performance as the company continued to benefit from improving market conditions throughout the world. We are seeing higher overall demand for our products with farm machinery sales in South America experiencing strong gains and construction equipment sales rising sharply. Deere’s performance also is being assisted by an advanced product portfolio and the continuing impact of a flexible cost structure and lean asset base.”

Outlook

Deere expects a strong demand to continue going forward, specifically in the regions outside the United States and Canada. For 4Q17, it expects equipment operations sales to rise 24.0%. It now expects fiscal 2017 revenues from equipment operations to rise 10.0% against the previous guidance of 9.0%.

Investors looking for exposure to DE can invest in the iShares MSCI Global Agriculture Producers (VEGI), which has invested 8.7% of its portfolio in Deere. The fund also provides exposure to Monsanto (MON), PotashCorp (POT), and FMC (FMC) with weights of 14.5%, 4.2%, and 3.2%, respectively, as of August 18, 2017.

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