Deere & Company (DE - Free Report) reported third-quarter fiscal 2023 (ended Jul 30) earnings of $10.20 per share, beating the Zacks Consensus Estimate of earnings of $8.14 per share. The bottom line increased 66% from the prior-year quarter’s levels. Strong demand aided by favorable market conditions, price realization and easing supply-chain constraints contributed to the improvement in the bottom line.
Net sales of equipment operations (comprising Agriculture and Turf, Construction and Forestry) were $14,284 million, up 10% year over year. Revenues topped the Zacks Consensus Estimate of $14,234 million. Total net sales (including financial services and others) were $15,801 million, up 12% year over year.
Operational Update
The cost of sales in the reported quarter was up 1% year over year to $9,624 million. Total gross profit increased 35% year over year to $6,177 million. Selling, administrative and general expenses (SA&G) rose 16% to $1,110 million from the prior-year period’s levels.
Total operating profit (including financial services) was up 5.5% year over year to $12,195 million in the fiscal third quarter.
Segment Performance
The Production & Precision Agriculture segment’s sales rose 12% year over year to $6,806 million. The figure was higher than our model estimate of revenues of $6,713 million for the quarter.
Operating profit increased 38% year over year to $1,782 million due to price realization and improved shipment volumes / sales mix. Higher production costs, SA&G and research and development (R&D) expenses, and the unfavorable impact of foreign currency exchange offset some of the gains. Our estimate for the segment’s operating profit was $1,461 million.
Small Agriculture & Turf sales rose 3% to $3,739 million from the year-earlier quarter’s levels. Segmental sales benefited from price realization, which offset the impact of low shipment volumes. Our projection for the segment’s sales was $3,671 million. Operating profit rose 33% year over year to $732 million. The impact of higher sales was offset by elevated production costs, SA&G and R&D expenses. The figure was higher than operating profit of $399 million projected for the segment.
Construction & Forestry sales were $3,739 million, up 14% year over year, backed by higher shipment volumes and price realization. The figure was higher than our projection of $3,613 million. Operating profit increased 39% year over year to $716 million. Gains from higher sales were partially offset by increased SA&G and R&D expenses, higher production costs, and the unfavorable impact of foreign currency exchange. Our estimate for the segment’s operating profit was $569 million.
The increase in production costs and SA&G and R&D expenses reported by Deere were lower than we had expected, leading to the variance in operating profit numbers for all the segments.
Revenues in Deere’s Financial Services division were $1,228 million in the reported quarter, up 36% year over year. The segment’s net income was $216 million in the quarter under review, up 3% from $209 million in the last year’s quarter.
Financial Update
Deere reported cash and cash equivalents of $6,576 million at the end of third-quarter fiscal 2023, compared with $4,359 million recorded at the year-ago quarter’s end.
Cash flow from operating activities was $2,896 million in the first nine-month period of fiscal 2023, compared with $418 million in the prior-year period.
At the end of the quarter, DE’s long-term borrowing was nearly $38 billion, compared with $32 billion at the year-ago quarter’s end.
Guidance
Deere expects net income for fiscal 2023 to be between $9.75 billion and $10 billion, up from the previously disclosed guidance of $9.25-$9.50 billion. Favorable farm fundamentals and increased investment in infrastructure will drive demand for DE’s equipment.
Net sales for Production & Precision Agriculture are expected to register growth of approximately 20% in fiscal 2023 from the prior-year quarter’s reported level. Sales of Small Agriculture & Turf are expected to be up around 5%. Sales of Construction & Forestry are projected to be up 15-20%. The Financial Services segment’s net income is expected to be around $630 million.
Price Performance
Deere’s shares have gained 13.9% in the past year, compared with the industry’s 11.7% growth.
Zacks Rank & Stocks to Consider
Deere currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. (WOR - Free Report) , Astec Industries, Inc. (ASTE) and Terex Corporation (TEX - Free Report) . WOR and ASTE sport a Zacks Rank #1 (Strong Buy) at present, and TEX has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 14.9%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $5.65 per share. The consensus estimate for 2023 earnings has moved 22.6% north in the past 60 days. Its shares have gained 43.4% in the last year.
Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $2.81 per share. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. ASTE’s shares have gained 27.8% in the last year.
The Zacks Consensus Estimate for Terex’s 2023 earnings per share is pegged at $1.61. Estimates were unchanged in the last 60 days. It has a trailing four-quarter average earnings surprise of 27.1%. TEX has gained 84.7% in the last year.
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Deere & Company (DE - Free Report) reported third-quarter fiscal 2023 (ended Jul 30) earnings of $10.20 per share, beating the Zacks Consensus Estimate of earnings of $8.14 per share. The bottom line increased 66% from the prior-year quarter’s levels. Strong demand aided by favorable market conditions, price realization and easing supply-chain constraints contributed to the improvement in the bottom line.
Net sales of equipment operations (comprising Agriculture and Turf, Construction and Forestry) were $14,284 million, up 10% year over year. Revenues topped the Zacks Consensus Estimate of $14,234 million. Total net sales (including financial services and others) were $15,801 million, up 12% year over year.
Operational Update
The cost of sales in the reported quarter was up 1% year over year to $9,624 million. Total gross profit increased 35% year over year to $6,177 million. Selling, administrative and general expenses (SA&G) rose 16% to $1,110 million from the prior-year period’s levels.
Total operating profit (including financial services) was up 5.5% year over year to $12,195 million in the fiscal third quarter.
Segment Performance
The Production & Precision Agriculture segment’s sales rose 12% year over year to $6,806 million. The figure was higher than our model estimate of revenues of $6,713 million for the quarter.
Operating profit increased 38% year over year to $1,782 million due to price realization and improved shipment volumes / sales mix. Higher production costs, SA&G and research and development (R&D) expenses, and the unfavorable impact of foreign currency exchange offset some of the gains. Our estimate for the segment’s operating profit was $1,461 million.
Small Agriculture & Turf sales rose 3% to $3,739 million from the year-earlier quarter’s levels. Segmental sales benefited from price realization, which offset the impact of low shipment volumes. Our projection for the segment’s sales was $3,671 million. Operating profit rose 33% year over year to $732 million. The impact of higher sales was offset by elevated production costs, SA&G and R&D expenses. The figure was higher than operating profit of $399 million projected for the segment.
Construction & Forestry sales were $3,739 million, up 14% year over year, backed by higher shipment volumes and price realization. The figure was higher than our projection of $3,613 million. Operating profit increased 39% year over year to $716 million. Gains from higher sales were partially offset by increased SA&G and R&D expenses, higher production costs, and the unfavorable impact of foreign currency exchange. Our estimate for the segment’s operating profit was $569 million.
The increase in production costs and SA&G and R&D expenses reported by Deere were lower than we had expected, leading to the variance in operating profit numbers for all the segments.
Revenues in Deere’s Financial Services division were $1,228 million in the reported quarter, up 36% year over year. The segment’s net income was $216 million in the quarter under review, up 3% from $209 million in the last year’s quarter.
Financial Update
Deere reported cash and cash equivalents of $6,576 million at the end of third-quarter fiscal 2023, compared with $4,359 million recorded at the year-ago quarter’s end.
Cash flow from operating activities was $2,896 million in the first nine-month period of fiscal 2023, compared with $418 million in the prior-year period.
At the end of the quarter, DE’s long-term borrowing was nearly $38 billion, compared with $32 billion at the year-ago quarter’s end.
Guidance
Deere expects net income for fiscal 2023 to be between $9.75 billion and $10 billion, up from the previously disclosed guidance of $9.25-$9.50 billion. Favorable farm fundamentals and increased investment in infrastructure will drive demand for DE’s equipment.
Net sales for Production & Precision Agriculture are expected to register growth of approximately 20% in fiscal 2023 from the prior-year quarter’s reported level. Sales of Small Agriculture & Turf are expected to be up around 5%. Sales of Construction & Forestry are projected to be up 15-20%. The Financial Services segment’s net income is expected to be around $630 million.
Price Performance
Deere’s shares have gained 13.9% in the past year, compared with the industry’s 11.7% growth.
Zacks Rank & Stocks to Consider
Deere currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. (WOR - Free Report) , Astec Industries, Inc. (ASTE) and Terex Corporation (TEX - Free Report) . WOR and ASTE sport a Zacks Rank #1 (Strong Buy) at present, and TEX has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 14.9%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $5.65 per share. The consensus estimate for 2023 earnings has moved 22.6% north in the past 60 days. Its shares have gained 43.4% in the last year.
Astec has an average trailing four-quarter earnings surprise of 20%. The Zacks Consensus Estimate for ASTE’s 2023 earnings is pegged at $2.81 per share. The consensus estimate for 2023 earnings has moved 4% north in the past 60 days. ASTE’s shares have gained 27.8% in the last year.
The Zacks Consensus Estimate for Terex’s 2023 earnings per share is pegged at $1.61. Estimates were unchanged in the last 60 days. It has a trailing four-quarter average earnings surprise of 27.1%. TEX has gained 84.7% in the last year.
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Global demand for oil is through the roof... and oil producers are struggling to keep up. So even though oil prices are well off their recent highs, you can expect big profits from the companies that supply the world with "black gold."
Zacks Investment Research has just released an urgent special report to help you bank on this trend.
In Oil Market on Fire, you'll discover 4 unexpected oil and gas stocks positioned for big gains in the coming weeks and months. You don't want to miss these recommendations.
Download your free report now to see them.
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