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Deere Stock Moves Up on Earnings Beat and Good Outlook

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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.

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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.

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