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Deere Misses Analysts’ Q4 Expectations but Still Rises

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Deere’s adjusted EPS

Deere (DE) reported its earnings results for the fourth quarter of fiscal 2018 before the market opened on November 21. It reported adjusted EPS of $2.30, reflecting a rise of 46.5% YoY (year-over-year). In the fourth quarter of fiscal 2017, its adjusted EPS were $1.57.

However, Deere failed to meet analysts’ expectation of adjusted EPS of $2.45. This was the third consecutive quarter during which Deere failed to meet analysts’ expectations.

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The company’s fiscal 2018 fourth-quarter adjusted EPS excluded a gain of $0.12 per share due to tax reforms. Deere’s adjusted EPS growth was fueled by the contribution from Wirtgen, higher volume shipments, higher price realizations, and lower warranty expenses. On the other hand, the increase in its production costs had an adverse impact on its EPS.

Fourth-quarter revenue

In the fourth quarter of fiscal 2018, Deere reported total revenue of $9.41 billion inclusive of financial services and other revenue. The result implied a 17% rise YoY. It reported revenue of $8.01 billion in the fourth quarter of fiscal 2017.

Deere’s revenue from equipment operations stood at $8.34 billion in the quarter compared to $7.09 billion in the corresponding quarter of the previous year, a rise of 18% YoY. Revenue from its equipment operations fell short of Wall Street’s estimate of $8.57 billion. Both of Deere’s reporting segments witnessed double-digit growth.

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Outlook for fiscal 2019

Deere expects revenue growth of 7% for fiscal 2019 over fiscal 2018. Further, Deere expects to see net income of $3.6 billion in the year.

Stock price reaction

Surprisingly, Deere stock reacted positively despite its earnings failing to meet analysts’ expectations. DE stock had risen 3.9% and was trading at $143.98 at the time of writing this article. Its industrial peers Caterpillar (CAT), Stanley Black & Decker (SWK) and Honeywell (HON) had risen 2.1%, 2.6%, and 1.0% respectively.

We’ll release detailed insights into Caterpillar’s fiscal 2018 second-quarter earnings soon, so stay tuned.

Investors can hold Deere indirectly by investing in the iShares MSCI Global Agriculture Producers ETF (VEGI). VEGI has invested 14.2% of its portfolio in Deere.

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