Market Overview

Deere Earnings Preview: Double-Digit Sales, EPS Growth Expected

Deere & Company (NYSE: DE), which in 2012 was listed as 97th in the Fortune 500 ranking, is scheduled to report its third-quarter fiscal 2012 results Wednesday morning, August 15. Investors will be hoping the company can build on four-straight quarters of revenue increases.

Expectations

Analysts on average predict that Deere will report per-share earnings of $2.32 for the three months that ended in July, as well as almost $9.6 billion in revenue. In the same period of last year, the company reported a profit of $1.69 per share and $7.7 billion in revenue. The earnings per share (EPS) estimate for the most recent quarter has risen in the past 60 days from $2.14. Analysts have underestimated Deere's per-share earnings in the past four quarters. Second-quarter earnings exceeded consensus EPS expectations by eight cents.

The company said in the second-quarter report that it saw meaningful gains across all of its divisions due to strong demand for its products. Deere raised its third-quarter and full-year forecasts to above consensus estimates. The share price rose more than two percent in the week following the report.

Looking ahead to the current quarter, the consensus forecast calls for year-over-year growth of both EPS and revenue. And so far, analysts expect full-year per-share earnings growth of more than 19 percent, as well as for revenue to be more than 16 percent higher than in the previous year.

The Company

Founded in 1837, the Moline, Illinois-based Deere & Company provides products and services primarily for agriculture and forestry worldwide. Its Agriculture and Turf segment manufactures and distributes farm and turf equipment. The Construction and Forestry segment provides a range of machines used in construction, materials handling and timber harvesting. Deere also has a financial services segment that finances sales and leases of new and used equipment. The company is an S&P 500 component with a market capitalization of more than $31 billion.

Competitors include Caterpillar (NYSE: CAT), CNH Global (NYSE: CNH) and Kubota (NYSE: KUB). Caterpillar and CNH recently posted strong second-quarter results due to increasing global demand for their products. Caterpillar also benefited from recent acquisitions.

During the three months that ended in July, Deere announced some upcoming senior management changes, as well as launched the MyJohnDeere.com portal and its first recreational utility vehicle.

Performance

Deere's long-term EPS growth forecast is more than 9 percent. Its operating margin is higher than the industry average, and the return on equity is a more than 40 percent. It has a dividend yield near 2.3 percent. Of 20 analysts surveyed by Thomson/First Call who follow the stock, eight rate the shares at Buy or Strong Buy. The mean price target, a sign of where they expect the share price to go, is about 10 percent higher than the current share price.

The stock has risen more than 5 percent in the past three weeks and is nearly 6 percent higher than a year ago. The share price is now above the 50-day and 200-day moving averages. Over the past six months, the stock has outperformed Caterpillar but underperformed the broader markets.

Posted-In: Caterpillar CNH Global DeereEarnings Long Ideas Short Ideas Previews Trading Ideas Best of Benzinga

 

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