Deere Stock Moves Up on Earnings Beat and Good Outlook


Feb. 21 2018, Published 11:01 a.m. ET

Deere’s fiscal 1Q18 earnings

Deere & Company (DE) announced its fiscal 1Q18 earnings before the market opened on February 16, 2018.

DE reported adjusted EPS (earnings per share) of $1.31, a whopping 111.3% higher than its fiscal 1Q17 EPS. DE also beat analysts’ EPS estimate of $1.20. Its adjusted EPS excluded $2.97 resulting from US tax reform legislation. Excluding this charge, DE reported net income of -$1.66 per share.

The growth in Deere’s adjusted EPS was primarily driven by increased revenue and a reduction in SG&A (selling, general, and administrative) expenses as a percentage of its sales. DE reported fiscal 1Q18 SG&A expenses of $705.0 million, representing 10.2% of revenue compared to 11.9% in fiscal 1Q17, implying a reduction of 170 basis points year-over-year. On the other hand, DE’s cost of goods sold (or COGS) rose 80 points over the previous year.

Article continues below advertisement

Stock price reaction

DE stock reacted positively to its fiscal 1Q18 earnings and closed at $169.44, representing a rise of ~1.6%. On the same day, peers Caterpillar (CAT) and AGCO (AGCO) fell 2.3% and 2.8%, respectively, while CNH Industrial (CNHI) rose 1.7%.

Earnings outlook

DE expects strong demand for equipment sales. As a result, DE has made an upward revision to its adjusted net income to $2.9 billion compared to its earlier guidance of $2.6 billion in fiscal 2018. On a GAAP (generally accepted accounting principles) basis, DE is expected to report net income of $2.1 billion.

Investors can indirectly hold Deere by investing in the iShares MSCI Global Agriculture Producers ETF (VEGI), which has invested 12.0% of its portfolio in Deere as of February 16, 2018.

In this series, we’ll take a look at Deere’s fiscal 1Q18 earnings in detail, along with its segment-by-segment revenue. We’ll also look at analysts’ latest recommendations for Deere following its earnings release.


More From Market Realist