Deere’s Q3 2018 Revenue Beats Estimates, Keeps Upward Trajectory

Deere’s fiscal third-quarter revenue

In the fiscal third quarter, Deere & Company (DE) reported total revenue of $10.31 billion, inclusive of financial services and other revenue. That implies a 32% rise over fiscal Q3 2017 when it reported revenue of $7.81 billion.

Deere’s revenue from equipment operations was $9.29 billion for the quarter compared to $6.83 billion in fiscal Q3 2017, a rise of 36% YoY (year-over-year). It beat analysts’ estimate of $9.21 billion.

Deere’s Q3 2018 Revenue Beats Estimates, Keeps Upward Trajectory

Deere’s equipment business growth was primarily driven by its acquisition of Wirtgen Group, which added 17% to its revenue. Higher shipments also pushed up its revenue. However, an unfavorable foreign currency exchange had an adverse impact of ~1% on its revenue. Both of Deere’s reporting segments witnessed significant revenue growth. We’ll look at the segments’ performances in detail in the upcoming parts of this series.

Geographically, sales in the United States and Canada rose 29%, while sales outside the United States and Canada rose 45%.

Management’s comments

Samuel R. Allen, Deere’s chair and CEO, said, “Deere’s third-quarter performance benefited from favorable market conditions and positive response to our advanced product lineup. Farm machinery sales in North America and Europe made solid gains, while construction equipment sales moved sharply higher and received significant support from our Wirtgen road-building unit. At the same time, we have continued to face cost pressures for raw materials and freight, which are being addressed through a combination of cost management and pricing actions.”

Outlook

Deere continued its positive outlook on the economy. Its pricing actions, higher shipments, and Wirtgen revenue will drive revenue growth. As a result, Deere expects growth of 30% in equipment sales in fiscal 2018 and growth of 21% in the fiscal fourth quarter. It expects no major impact due to the strengthening of the dollar.

Investors can indirectly hold Deere by investing in the VanEck Vectors Agribusiness ETF (MOO), which has invested 7% of its portfolio in Deere. The fund also provides exposure to FMC (FMC), Tractor Supply (TSCO), and AGCO (AGCO), with weights of 2.6%, 2.4%, and 1.1%, respectively, as of August 20.