Conservative · Stocks to Consider and Updates

Deere Profits Rise; Misses Estimates

Shares of Deere & Co. (NYSE: DE – $145.53) are trading higher by 5%, despite an earnings miss and lower-than-expected guidance. For the fourth period net income advanced by 54% to $784.8 million on worldwide net sales of $9.416 billion, 17% above the year ago tally, but somewhat below consensus estimates. Net sales for equipment operations were $8.343 billion for the quarter and $33.351 billion for the year, compared with respective totals of $7.094 billion and $25.885 billion in 2017. On a per share basis, DE earned $2.42 per share for the fourth quarter compared with $1.57 last year, but three cents lower than Street views. Full-year adjusted earnings were $9.46 per share compared to $6.68 in fiscal 2017. Sales in the company’s construction and irrigation systems units helped offset some of the weakness in agriculture. Construction and Forestry segment sales increased 65% for the quarter and 78% for the year, with the Wirtgen irrigation acquisition adding 45% and 53% for the periods. Deere said unfavorable foreign currency exchange rates, higher production cost and research and development expenses pulled down profit as farm equipment sales rose only 3% during the quarter.

       Looking to 2019, Deere lowered its worldwide sales of Agriculture and Turf equipment forecast to be up about 3% for fiscal-year 2019 and Construction & Forestry are anticipated to be up about 15%. Financial Services operations is projected to be about $630 million. Deere stock has fallen sharply in price since it established a record high earlier this year, primarily due to a correction for equities in general. Over the long haul, however, shares of Deere can be maintained in a well-diversified conservative account. The 2% dividend yield adds to the pot for decent total returns, especially when viewed on a risk-adjusted basis.

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