Deere Shares Drop After Q2 Results, Despite Beating Street Expectations

  • Deere & Company DE reported second-quarter FY22 net sales and revenue growth of 11% year-over-year to $13.37 billion, beating the consensus of $13.2 billion.
  • EPS increased to $6.81 from $5.68 in 2Q21, beating the consensus of $6.71.
  • Sales by segments: Production & Precision Agriculture $5.12 billion (+13% Y/Y), Small Agriculture & Turf $3.57 billion (+5% Y/Y), and Construction & Forestry $3.35 billion (+9% Y/Y).
  • The operating profit increased by 9.5% Y/Y to $2.67 billion, and the margin contracted by 25 bps to 20%.
  • Deere's net cash used for operating activities in the six months totaled $(1.76) billion, compared to cash generated of $1.79 billion a year ago.
  • "Looking ahead, we believe demand for farm equipment will continue benefiting from positive fundamentals in spite of availability concerns and inflationary pressures affecting our customers' input costs," commented John C. May, chairman and CEO.
  • FY22 Outlook: Deere expects net income of $7.0 billion - $7.4 billion (prior view $6.7 billion - $7.1 billion).
  • For Production & Precision Ag, the company expects sales to grow by 25% - 30%, Small Ag & Turf sales to expand by ~15%, and Construction & Forestry segment sales to increase by 10% - 15%.
  • It expects Financial Services results to be slightly lower than FY21 due to a higher provision for credit losses and higher selling, administrative, and general expenses.
  • Price Action: DE shares are trading lower by 11.8% at $321.50 on the last check Friday.
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