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Deere (DE) Up 5% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Deere (DE - Free Report) . Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Deere due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Deere's Earnings and Sales Surpass Estimates in Q4
Deere posted fourth-quarter fiscal 2020 (ended Nov 1, 2020) earnings of $2.39 per share, beating the Zacks Consensus Estimate of $1.44. The reported figure also improved 5.3% from the prior-year quarter.
Net sales of equipment operations (which comprise Agriculture and Turf, Construction and Forestry) came in at $8.66 billion, declining 0.5% year over year. Revenues, however, surpassed the Zacks Consensus Estimate of $7.30 billion. Total net sales (including financial services and others) came in at $9.73 billion, down 1.7% year over year.
Operational Update
Cost of sales in the reported quarter was down 3.9% year over year to $6.4 billion. Total gross profit for the reported quarter improved 3.2%, year over year, to $3.3 billion. Selling, administrative and general expenses flared up 7% to $1,011 million from the prior-year quarter. Equipment operations reported an operating profit of $1,056 million in the quarter compared with the $788 million witnessed in the prior-year quarter. Total operating profit (including financial services) climbed 42.4% year over year to $1,305 million in the fiscal fourth quarter.
Segment Performance
The Agriculture & Turf segment’s sales were up 7.6% year on year to $6.19 billion, primarily owing to price realization and higher shipment volumes, partly offset by the unfavorable impact of currency translation. Operating profit in the segment surged 63% year over year to $860 million.
Construction & Forestry sales slid 16% to $2.46 billion from the year-earlier quarter on lower shipment volumes, partly masked by price realization. This segment’s operating profit slid 25% year over year to $196 million.
Net revenues in Deere’s Financial Services division came in at $891 million in the reported quarter, down 8% year on year. The segment’s operating profit came in at $249 million, significantly up a whopping 95% year over year.
Financial Update
Deere reported cash and cash equivalents of $7.1 billion at the end of fiscal 2020 compared with the $3.8 billion recorded at the end of prior fiscal year. Cash generated from operating activities were $7,483 million in fiscal 2020 compared with the prior fiscal year’s $3,412 million. At the end of fiscal 2020, long-term borrowing was roughly $33 billion, up from the $30 billion witnessed at the end of the previous fiscal year.
Fiscal 2020 Performance
Deere reported earnings of $8.69 per share in fiscal 2020, beating the Zacks Consensus Estimate of $7.74.
Net sales of equipment operations declined 10% year over year to $31.3 billion but surpassed the Zacks Consensus Estimate of $29.9 billion. Total net sales (including financial services and others) came in at $35.5 billion, down 9% year over year.
Outlook
The company expects net income for fiscal 2021 to be between $3.6 billion and $4 billion. Deere expects to benefit from the improving farm economy, and stabilization in the construction and forestry markets in fiscal 2021.
The company expects Agriculture and Turf equipment sales to be up 10-15% for fiscal 2021. The Construction and Forestry equipment segment’s sales are estimated to be up 5-10% for the fiscal year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 27% due to these changes.
VGM Scores
At this time, Deere has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Deere has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Deere (DE) Up 5% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Deere (DE - Free Report) . Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Deere due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Deere's Earnings and Sales Surpass Estimates in Q4
Deere posted fourth-quarter fiscal 2020 (ended Nov 1, 2020) earnings of $2.39 per share, beating the Zacks Consensus Estimate of $1.44. The reported figure also improved 5.3% from the prior-year quarter.
Net sales of equipment operations (which comprise Agriculture and Turf, Construction and Forestry) came in at $8.66 billion, declining 0.5% year over year. Revenues, however, surpassed the Zacks Consensus Estimate of $7.30 billion. Total net sales (including financial services and others) came in at $9.73 billion, down 1.7% year over year.
Operational Update
Cost of sales in the reported quarter was down 3.9% year over year to $6.4 billion. Total gross profit for the reported quarter improved 3.2%, year over year, to $3.3 billion. Selling, administrative and general expenses flared up 7% to $1,011 million from the prior-year quarter. Equipment operations reported an operating profit of $1,056 million in the quarter compared with the $788 million witnessed in the prior-year quarter. Total operating profit (including financial services) climbed 42.4% year over year to $1,305 million in the fiscal fourth quarter.
Segment Performance
The Agriculture & Turf segment’s sales were up 7.6% year on year to $6.19 billion, primarily owing to price realization and higher shipment volumes, partly offset by the unfavorable impact of currency translation. Operating profit in the segment surged 63% year over year to $860 million.
Construction & Forestry sales slid 16% to $2.46 billion from the year-earlier quarter on lower shipment volumes, partly masked by price realization. This segment’s operating profit slid 25% year over year to $196 million.
Net revenues in Deere’s Financial Services division came in at $891 million in the reported quarter, down 8% year on year. The segment’s operating profit came in at $249 million, significantly up a whopping 95% year over year.
Financial Update
Deere reported cash and cash equivalents of $7.1 billion at the end of fiscal 2020 compared with the $3.8 billion recorded at the end of prior fiscal year. Cash generated from operating activities were $7,483 million in fiscal 2020 compared with the prior fiscal year’s $3,412 million. At the end of fiscal 2020, long-term borrowing was roughly $33 billion, up from the $30 billion witnessed at the end of the previous fiscal year.
Fiscal 2020 Performance
Deere reported earnings of $8.69 per share in fiscal 2020, beating the Zacks Consensus Estimate of $7.74.
Net sales of equipment operations declined 10% year over year to $31.3 billion but surpassed the Zacks Consensus Estimate of $29.9 billion. Total net sales (including financial services and others) came in at $35.5 billion, down 9% year over year.
Outlook
The company expects net income for fiscal 2021 to be between $3.6 billion and $4 billion. Deere expects to benefit from the improving farm economy, and stabilization in the construction and forestry markets in fiscal 2021.
The company expects Agriculture and Turf equipment sales to be up 10-15% for fiscal 2021. The Construction and Forestry equipment segment’s sales are estimated to be up 5-10% for the fiscal year.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 27% due to these changes.
VGM Scores
At this time, Deere has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Deere has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.