Deere Hurdles Estimates on Record Sales and Earnings, Falls on Guidance

Deere & Company DE is down on Wednesday after posting record second-quarter sales and earnings, but missing the mark on guidance. The Moline, Illinois-based firm's EPS rose 5.7 percent to $2.76, topping expectations of $2.72. Revenue climbed nine percent year-over-year to $10.91 billion, blowing away the $9.81 billion Wall Street consensus. Growing its Turf Agriculture and turf sales soared 12 percent during the quarter to $8.69 billion primarily on higher shipment volumes and price realization. The company expects this segment to grow by about seven percent for the year, citing relatively high commodity prices, strong farm incomes, global expansion and advanced new products. Specifically, the farm and construction machinery giant expects sales to spike 15 to 20 percent in South America due to strong market conditions in Brazil. Meanwhile, agricultural equipment sales in the US and Canada are expected to increase approximately five percent on strong demand for large equipment. Turf and utility equipment sales are expected to remain flat or decline slightly because of the cool, wet spring on the continent and cautious consumer sentiment. EU sales, however, are expected to drop around five percent on last year's poor UK harvest and overall economic weakness. Sales in the remainder of the world are expected to change little from 2012. Lost in the Forest Construction and forestry sales dipped six percent to $1.57 billion for the quarter on lower shipment volumes. For the year, Deere expects this segment to drop around five percent on cool, wet weather in North America, a cautious US economic outlook and flat sales in world forestry markets. Greener Pastures Financial services revenue jumped 10 percent to $536 million. While the company hasn't provided a specific growth forecast, it expects net income in this segment to grow to approximately $550 million due to gains in the credit portfolio and lower crop insurance claims. Muddy Guidance Deere expects full-year net earnings of around $3.3 billion. If this pans out, it will finish at approximately $8.47 per share, falling short of the $8.60 analysts currently expect. Commenting on the weak guidance, Chairman and CEO Samuel R. Allen stated, “Deere's near-term forecast is being tempered by lingering economic concerns in many parts of the world, which are restraining business confidence and growth. In addition, cool, wet weather in North America has delayed crop planting, slowed construction activity and hurt sales of turf-care equipment.” Shot Down on Wall Street Despite its successful quarter, Deere has been shot down on its sub-par guidance. The stock has fallen below $90 in the morning hours of trading, reaching a two-week low. Deere is down about 4.5 percent on Wednesday.