Conservative · Stocks to Consider and Updates

Deere Misses Earnings on Strong Sales; Maintains Outlook

Agriculture and construction manufacturer Deere & Co. (NYSE: DE – $159.00) missed Wall Street’s estimates, hurt by higher raw materials and logistics costs as well as by slowing trade between the United States and its partners, particularly China, The results sent its shares 2% lower in today’s trading. For the first quarter, Deere had net revenue of $7.984 billion up 15% from last year and above Street estimates of $6.83 billion. Adjusted profit of $1.54 per share was up 14% from a year earlier, but below analysts’ estimates of $1.76. Sales in the Agriculture & Turf segment increased due to higher shipment volumes and price realization, partly offset by the unfavorable effects of currency translation, higher input costs and warranty-related expenses. Construction & Forestry segments sales were up primarily due to the inclusion of Wirtgen for the full period versus one month in the first quarter of 2018. Sales increased due to price hikes and higher shipment volumes, partially offset by the unfavorable effects of currency.

       Management maintained its 2019 earnings guidance with full-year net income expected to be $3.6 billion compared with $3.06 billion in 2018, with a 7% annual growth in equipment sales. The company is showing strong cash flow, operating efficiency and earnings quality along with a rock-solid balance sheet. Also, the price valuation, based on 2019 projected earnings per share of $11.25, stands at 14 suggesting a relatively low amount of risk at current levels and the well-covered $3.12 annual dividend yields 1.9%.

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