Deere & Company (DE - Free Report) reported second-quarter fiscal 2022 (ended May 1, 2022) earnings of $6.81 per share, beating the Zacks Consensus Estimate of $6.65. The bottom line increased 19.9% from the prior-year quarter’s levels. Continued strong demand despite supply chain constraints contributed to the bottom line.
Net sales of equipment operations (comprising Agriculture and Turf, Construction and Forestry) were $12,034 million, up 9% year over year. Revenues lagged the Zacks Consensus Estimate of $13,442 million. Total net sales (including financial services and others) were $13,370 million, up 11% year over year.
Operational Update
The cost of sales in the reported quarter was up 12% year over year to $8,918 million. Total gross profit in the reported quarter increased 10% year over year to $2,552 million. Selling, administrative and general expenses rose 11% to $932 million from the prior-year period’s levels.
Total operating profit (including financial services) was up 9% year over year to $2,670 million in the fiscal second quarter.
Segment Performance
The Production & Precision Agriculture segment’s sales rose 13% year over year to $5,117 million, primarily driven by higher shipment volumes and price realization. Operating profit in the segment increased 5% year over year to $1,057 million.
Small Agriculture & Turf sales rose 5% to $3,570 million from the year-earlier quarter’s levels as benefits from price realization offset by the unfavorable impact of currency translation. The segment’s operating profit fell 20% year over year to $520 million.
Construction & forestry segment sales were $3,347 million, up 9% year over year, backed by higher shipment volumes and price realization. The segment’s operating profit flared up 66% year over year to $814 million.
Net revenues in Deere’s Financial Services division were $864 million in the reported quarter, down 3% year on year. The segment’s operating profit amounted to $279 million, down 5% year over year.
Financial Update
Deere reported cash and cash equivalents of $3,878 million at the end of second-quarter fiscal 2022 compared with $7,182 million recorded at the end of the year-ago quarter. Cash utilized in operating activities was $1,762 million in the first half of fiscal 2022 against cash generation of $1,786 million in the prior-year period. At the end of the quarter, the long-term borrowing was nearly $32 billion compared with $33 billion in the year-ago quarter’s end.
Outlook
Deere expects net income for fiscal 2022 to be between $7.0 billion and $7.4 billion, up from the prior estimate of $6.7-$7.1 billion. Demand for farm and construction equipment will continue to be supported by positive fundamentals.
Price Performance
Deere’s shares have gained 1.4% in the past year compared with the industry’s decline of 0.4%.
Zacks Rank & Stocks to Consider
Deere currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Graphic Packaging Holding Company (GPK - Free Report) , Myers Industries (MYE - Free Report) and Packaging Corporation of America (PKG - Free Report) . While GPK and MYE flaunt a Zacks Rank #1 (Strong Buy), PKG carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.
Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 14.8% in a year.
Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.
MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have gained 13% in the past year.
Packaging Corporation has an expected earnings growth rate of 16.2% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 4.2% in the past 60 days.
PKG has a trailing four-quarter earnings surprise of 19.6%, on average. Packaging Corporation’s shares have gained 4% in the past year.
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Deere & Company (DE - Free Report) reported second-quarter fiscal 2022 (ended May 1, 2022) earnings of $6.81 per share, beating the Zacks Consensus Estimate of $6.65. The bottom line increased 19.9% from the prior-year quarter’s levels. Continued strong demand despite supply chain constraints contributed to the bottom line.
Net sales of equipment operations (comprising Agriculture and Turf, Construction and Forestry) were $12,034 million, up 9% year over year. Revenues lagged the Zacks Consensus Estimate of $13,442 million. Total net sales (including financial services and others) were $13,370 million, up 11% year over year.
Operational Update
The cost of sales in the reported quarter was up 12% year over year to $8,918 million. Total gross profit in the reported quarter increased 10% year over year to $2,552 million. Selling, administrative and general expenses rose 11% to $932 million from the prior-year period’s levels.
Total operating profit (including financial services) was up 9% year over year to $2,670 million in the fiscal second quarter.
Segment Performance
The Production & Precision Agriculture segment’s sales rose 13% year over year to $5,117 million, primarily driven by higher shipment volumes and price realization. Operating profit in the segment increased 5% year over year to $1,057 million.
Small Agriculture & Turf sales rose 5% to $3,570 million from the year-earlier quarter’s levels as benefits from price realization offset by the unfavorable impact of currency translation. The segment’s operating profit fell 20% year over year to $520 million.
Construction & forestry segment sales were $3,347 million, up 9% year over year, backed by higher shipment volumes and price realization. The segment’s operating profit flared up 66% year over year to $814 million.
Net revenues in Deere’s Financial Services division were $864 million in the reported quarter, down 3% year on year. The segment’s operating profit amounted to $279 million, down 5% year over year.
Financial Update
Deere reported cash and cash equivalents of $3,878 million at the end of second-quarter fiscal 2022 compared with $7,182 million recorded at the end of the year-ago quarter. Cash utilized in operating activities was $1,762 million in the first half of fiscal 2022 against cash generation of $1,786 million in the prior-year period. At the end of the quarter, the long-term borrowing was nearly $32 billion compared with $33 billion in the year-ago quarter’s end.
Outlook
Deere expects net income for fiscal 2022 to be between $7.0 billion and $7.4 billion, up from the prior estimate of $6.7-$7.1 billion. Demand for farm and construction equipment will continue to be supported by positive fundamentals.
Price Performance
Deere’s shares have gained 1.4% in the past year compared with the industry’s decline of 0.4%.
Zacks Rank & Stocks to Consider
Deere currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector are Graphic Packaging Holding Company (GPK - Free Report) , Myers Industries (MYE - Free Report) and Packaging Corporation of America (PKG - Free Report) . While GPK and MYE flaunt a Zacks Rank #1 (Strong Buy), PKG carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Graphic Packaging has an estimated earnings growth rate of 86.8% for the current year. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 7.6%.
Graphic Packaging pulled off a trailing four-quarter earnings surprise of 7.2%, on average. The company’s shares have appreciated 14.8% in a year.
Myers Industries has an expected earnings growth rate of 67% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 27% in the past 60 days.
MYE has a trailing four-quarter earnings surprise of 20.1%, on average. Myers Industries’ shares have gained 13% in the past year.
Packaging Corporation has an expected earnings growth rate of 16.2% for 2022. The Zacks Consensus Estimate for the current year’s earnings has moved up 4.2% in the past 60 days.
PKG has a trailing four-quarter earnings surprise of 19.6%, on average. Packaging Corporation’s shares have gained 4% in the past year.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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