Conservative · Stocks to Consider and Updates

Deere Reports Higher Sales and Profits; Improves Guidance

Shares of construction and agriculture equipment manufacturer Deere & Co. (NYSE: – DE – $143.50) are trading at an all-time high after reporting a 79% increase in profits for the fiscal fourth quarter over this time last year helped by increased sales as demand for equipment improves. Earnings were $510.3 million, or $1.57 per share, up from $285.3 million, or $.90 per share for this period last year. Analysts were expecting adjusted earnings of $1.47 a share. Total net sales rose 26% to $7.09 billion vs. $5.65 billion a year ago and estimates by Wall Street of $6.99 billion. Agriculture and turf sales increased 22% and construction and forestry sales rose 37%. Demand for farm machinery in South America, in particular, had strong gains, while sales of tractors and combines in North America were up double digits during the period. The improvement for the quarter was primarily driven by higher shipment volumes, a favorable product mix and price realization, partially offset by higher production costs, higher selling, administrative and general expenses 

       Guiding for the future, total equipment sales are projected to increase by about 22% for fiscal 2018 and by about 38% for the first quarter compared with the same periods of 2017. Agriculture and Turf are forecast at a 9% increase, with an especially strong estimate for Construction and Forestry, up about 69%. Deere said that for next fiscal year, it expects earnings of $2.6 billion. The Moline, Illinois-based company is also finishing buying Wirtgen Group, a German-based road-paving equipment business, which should contribute $3.1 billion in revenue next year and net income of $25 million. For the full year 2018, consensus estimates for earnings per share are at $7.24 vs. actual profits of $6.68 for this past fiscal year and the outlook for 2019 stands at $8.46. Shares of high-quality Deere can continue to be held for further total returns in the years ahead.

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