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Deere (DE) Q1 Earnings Top Estimates, Rise Y/Y on Solid Demand
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Deere & Company (DE - Free Report) reported first-quarter fiscal 2023 (ended Mar 31, 2023) earnings of $6.55 per share, beating the Zacks Consensus Estimate of $5.53. The bottom line surged 124% from the prior-year quarter’s level, as higher shipment volumes and price realization helped offset the steep production and other expenses. DE witnessed strong demand for both farm and construction equipment.
Net sales of equipment operations (comprising Agriculture and Turf, Construction and Forestry) were $11.75 billion, up 34% from the prior-year quarter’s level. Revenues beat the Zacks Consensus Estimate of $11.31 billion. Total net sales (including financial services and others) were $12.6 billion, up 32% from the year-earlier quarter’s reading.
Operational Update
The cost of sales in the reported quarter was up 18.5% from the prior-year quarter’s reading to $7.9 billion. Total gross profit in the reported quarter surged 64% from the prior-year quarter’s level to $4.7 billion. Selling, administrative and general expenses rose 22% to $952 million from the prior-year period.
Total operating profit (including financial services) surged 104% from the prior-year quarter to $2,518 million in the fiscal first quarter.
Segmental Performance
The Production & Precision Agriculture segment’s sales rose 55% from the prior-year quarter to $5,198 million primarily due to higher shipment volumes and price realization. The operating profit in the segment surged 308% from the prior-year quarter to $1,208 million. Gains from higher shipment volumes and price realization were offset by escalated production costs as well as higher R&D and SA&G expenses.
Small Agriculture & Turf sales rose 14% to $3,001 million from the year-earlier quarter due to higher shipment volumes and price realization, partially offset by the unfavorable impacts of currency translation. The segment’s operating profit rose 20% from the prior-year quarter’s level to $447 million, mainly aided by price realization and improved shipment volumes, partially offset by elevated production costs, higher R&D and SA&G expenses, and the unfavorable effects of foreign exchange.
Construction & forestry segment sales were $3,203 million, up 26% from the prior-year quarter, backed by price realization and higher volumes, partially offset by the negative effects of currency translation. The segment’s operating profit was up 130% from the prior-year quarter’s levels to $625 million on the back of price realization and increased sales volume. However, higher production costs dampened these gains.
Net revenues in Deere’s Financial Services division were $1,040 million in the reported quarter compared with the prior-year quarter’s $870 million. The segment’s operating profit amounted to $238 million, down 20% from the year-ago quarter’s level.
Financial Update
Deere reported cash and cash equivalents of around $4 billion at the end of the first quarter of fiscal 2023 compared with $4.8 billion recorded at the end of fiscal 2022. Cash used in operating activities was $1.2 billion in the first quarter of fiscal 2023 compared with $2.5 billion in the comparable quarter in the last fiscal. At the end of the fiscal first quarter, the long-term borrowing was $35.1 billion, up from $33.6 billion at the end of fiscal 2022.
Outlook
Deere expects net income for fiscal 2023 between $8.75 billion and $9.25 billion compared with $7.1 billion reported in fiscal 2022. 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 sales growth of 20% in fiscal 2023 from the prior-year quarter’s reported level. Sales growth for Small Agriculture & Turf is expected to be flat to up 5% and for Construction & forestry to be up 10-15%.
Price Performance
Shares of Deere have gained 5.9% in the past year compared with the industry’s 6.9% growth.
O-I Glass has an average trailing four-quarter earnings surprise of 16.4%. The Zacks Consensus Estimate for OI’s 2023 earnings is pegged at $2.51 per share. This indicates a 9.13% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved 12.5% north in the past 60 days. OI’s shares gained 58.7% in the last year.
Tenaris has an average trailing four-quarter earnings surprise of 11.5%. The Zacks Consensus Estimate for TS’ 2023 earnings is pegged at $5.32 per share. This indicates a 22.4% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved north by 2.7% in the past 60 days. Its shares gained 39.8% in the last year.
The Zacks Consensus Estimate for Grainger’s fiscal 2023 earnings per share is pegged at $32.65, suggesting an increase of 10% from last year. The consensus estimate for fiscal 2023 earnings has moved 6% upward in the last 60 days. GWW has a trailing four-quarter average earnings surprise of 9.81%. Its shares gained 42% over the last year.
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Deere (DE) Q1 Earnings Top Estimates, Rise Y/Y on Solid Demand
Deere & Company (DE - Free Report) reported first-quarter fiscal 2023 (ended Mar 31, 2023) earnings of $6.55 per share, beating the Zacks Consensus Estimate of $5.53. The bottom line surged 124% from the prior-year quarter’s level, as higher shipment volumes and price realization helped offset the steep production and other expenses. DE witnessed strong demand for both farm and construction equipment.
Net sales of equipment operations (comprising Agriculture and Turf, Construction and Forestry) were $11.75 billion, up 34% from the prior-year quarter’s level. Revenues beat the Zacks Consensus Estimate of $11.31 billion. Total net sales (including financial services and others) were $12.6 billion, up 32% from the year-earlier quarter’s reading.
Operational Update
The cost of sales in the reported quarter was up 18.5% from the prior-year quarter’s reading to $7.9 billion. Total gross profit in the reported quarter surged 64% from the prior-year quarter’s level to $4.7 billion. Selling, administrative and general expenses rose 22% to $952 million from the prior-year period.
Deere & Company Price, Consensus and EPS Surprise
Deere & Company price-consensus-eps-surprise-chart | Deere & Company Quote
Total operating profit (including financial services) surged 104% from the prior-year quarter to $2,518 million in the fiscal first quarter.
Segmental Performance
The Production & Precision Agriculture segment’s sales rose 55% from the prior-year quarter to $5,198 million primarily due to higher shipment volumes and price realization. The operating profit in the segment surged 308% from the prior-year quarter to $1,208 million. Gains from higher shipment volumes and price realization were offset by escalated production costs as well as higher R&D and SA&G expenses.
Small Agriculture & Turf sales rose 14% to $3,001 million from the year-earlier quarter due to higher shipment volumes and price realization, partially offset by the unfavorable impacts of currency translation. The segment’s operating profit rose 20% from the prior-year quarter’s level to $447 million, mainly aided by price realization and improved shipment volumes, partially offset by elevated production costs, higher R&D and SA&G expenses, and the unfavorable effects of foreign exchange.
Construction & forestry segment sales were $3,203 million, up 26% from the prior-year quarter, backed by price realization and higher volumes, partially offset by the negative effects of currency translation. The segment’s operating profit was up 130% from the prior-year quarter’s levels to $625 million on the back of price realization and increased sales volume. However, higher production costs dampened these gains.
Net revenues in Deere’s Financial Services division were $1,040 million in the reported quarter compared with the prior-year quarter’s $870 million. The segment’s operating profit amounted to $238 million, down 20% from the year-ago quarter’s level.
Financial Update
Deere reported cash and cash equivalents of around $4 billion at the end of the first quarter of fiscal 2023 compared with $4.8 billion recorded at the end of fiscal 2022. Cash used in operating activities was $1.2 billion in the first quarter of fiscal 2023 compared with $2.5 billion in the comparable quarter in the last fiscal. At the end of the fiscal first quarter, the long-term borrowing was $35.1 billion, up from $33.6 billion at the end of fiscal 2022.
Outlook
Deere expects net income for fiscal 2023 between $8.75 billion and $9.25 billion compared with $7.1 billion reported in fiscal 2022. 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 sales growth of 20% in fiscal 2023 from the prior-year quarter’s reported level. Sales growth for Small Agriculture & Turf is expected to be flat to up 5% and for Construction & forestry to be up 10-15%.
Price Performance
Shares of Deere have gained 5.9% in the past year compared with the industry’s 6.9% growth.
Image Source: Zacks Investment Research
Zacks Rank & Other Stocks to Consider
Deere currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks from the Industrial Products sector are O-I Glass, Inc. (OI - Free Report) , Tenaris (TS - Free Report) and W.W. Grainger, Inc. (GWW - Free Report) . All of these companies sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
O-I Glass has an average trailing four-quarter earnings surprise of 16.4%. The Zacks Consensus Estimate for OI’s 2023 earnings is pegged at $2.51 per share. This indicates a 9.13% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved 12.5% north in the past 60 days. OI’s shares gained 58.7% in the last year.
Tenaris has an average trailing four-quarter earnings surprise of 11.5%. The Zacks Consensus Estimate for TS’ 2023 earnings is pegged at $5.32 per share. This indicates a 22.4% increase from the prior-year reported figure. The consensus estimate for 2023 earnings has moved north by 2.7% in the past 60 days. Its shares gained 39.8% in the last year.
The Zacks Consensus Estimate for Grainger’s fiscal 2023 earnings per share is pegged at $32.65, suggesting an increase of 10% from last year. The consensus estimate for fiscal 2023 earnings has moved 6% upward in the last 60 days. GWW has a trailing four-quarter average earnings surprise of 9.81%. Its shares gained 42% over the last year.