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Analyzing Deere’s Expected First-Quarter Revenues

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Feb. 14 2019, Updated 9:40 a.m. ET

Deere’s revenues

Deere (DE) is expected to report revenues of $6.82 billion in the first quarter from its equipment operations. The figure doesn’t include the revenues from financial services. The expected revenues represent 14.2% growth on a year-over-year basis. In the first quarter of fiscal 2018, Deere reported revenues of $5.97 billion from equipment operations. If Deere meets the revenue expectations, it would be the highest first-quarter revenues since the first quarter of fiscal 2015.

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In the first quarter, the revenue growth will likely be driven by acquisition revenues. The acquisition of the Wirtgen Group is expected to contribute significantly to Deere’s overall revenue growth. The acquisition revenues will account for two months. The Wirtgen Group was acquired in December 2017. In the fourth quarter, the Wirtgen Group contributed ~11% to Deere’s revenues. In the fourth quarter, the Wirtgen Group will likely contribute ~12% of the revenues. Deere’s King Agro and PLA acquisitions are also expected to boost the revenues.

Higher pricing and higher volume shipments could drive Deere’s revenues. However, Deere could face challenges due to unfavorable foreign currency. Since June, the US Dollar Index, which measures the dollar’s movement against the basket of currencies, has risen ~2.3%. The US Dollar Index could have a negative impact on Deere’s revenues.

CNH Industrial (CNHI), Caterpillar (CAT), and FMC (FMC) registered revenue growth of 0.53%, 11.2%, and 24.5%, respectively, in the latest quarterly earnings.

Investors could get exposure to Deere by investing in the iShares MSCI Global Agriculture Producers ETF (VEGI). VEGI has invested 15.6% of its portfolio in Deere as of February 13.

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