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Deere (DE) Earnings Beat Estimates in Q2, Hikes '22 View

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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.

Deere & Company Price, Consensus and EPS Surprise

 

Deere & Company Price, Consensus and EPS Surprise

Deere & Company price-consensus-eps-surprise-chart | Deere & Company Quote

 

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 Investment Research
Image Source: Zacks Investment Research

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.