Conservative · Stocks to Consider and Updates

Deere Reports Mixed Results; Reaffirms Guidance

Shares of Deere & Co. (NYSE: DE – $140.03) are trading higher as it had strong demand in its construction and farming markets in the latest quarter, but it would cut costs and raise prices due to higher raw material and logistics expenses. Costs for steel and aluminum have been pushed up by U.S. tariffs on imported metal and a nationwide truck shortage has led to increased shipping expenses. “Replacement demand for large agricultural equipment is driving sales even in the face of tensions over global trade and other geopolitical issues,” Deere Chief Executive Sam Allen said. 

       Total revenue in the fiscal third quarter rose 32% to $10.31 billion as results were boosted by the company’s $5.33 billion December purchase of German road-paving equipment company Wirtgen Group. Net income of $910.3 million was up from $641.8 million a year earlier. On an adjusted basis the company earned $2.59 a share, as equipment sales rose 36% to $9.29 billion. Analysts, however, were expecting $2.75 a share on equipment sales of $9.21 billion. The Moline, Illinois company reaffirmed its revenue and profit forecast for the year predicting overall sales of farm and construction equipment will increase by about 30%. Deere now expects sales of farm equipment to grow 15% this year, up from its prior forecast due to more favorable dairy and livestock sectors. In its construction equipment unit it is looking for sales to jump 81%, as it also sees increased home building in the U.S., more activity in the oil and gas sector and economic growth globally. The company continues to forecast adjusted net income of $3.1 billion. The good quality shares can be retained for the long-term.


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