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Deere & Company (DE - Free Report) reported second-quarter fiscal 2023 (ended Apr 30) earnings of $9.65 per share, beating the Zacks Consensus Estimate of $8.57. The bottom line increased 42% from the prior-year quarter’s levels. Continued strength in demand despite supply-chain constraints contributed to the bottom line.
Net sales of equipment operations (comprising Agriculture and Turf, Construction and Forestry) were $16,079 million, up 33.6% year over year. Revenues topped the Zacks Consensus Estimate of $14,845 million. Total net sales (including financial services and others) were $17,387 million, up 30% year over year.
Operational Update
The cost of sales in the reported quarter was up 20.3% year over year to $10,730 million. Total gross profit increased 49.5% year over year to $6,657 million. Selling, administrative and general expenses rose 42.7% to $1,330 million from the prior-year period’s levels.
Total operating profit (including financial services) was up 46% year over year to $3,898 million in the fiscal second quarter.
The Production & Precision Agriculture segment’s sales rose 53% year over year to $7,822 million, primarily driven by higher shipment volumes and price realization. Operating profit increased 105% year over year to $2,170 million.
Small Agriculture & Turf sales rose 16% to $4,145 million from the year-earlier quarter’s levels. Segmental sales benefited from price realization and higher shipment volume offset by the unfavorable impact of currency translation. Operating profit rose 63% year over year to $849 million.
Construction & Forestry sales were $4,112 million, up 23% year over year, backed by higher shipment volumes and price realization. Operating profit increased 3% year over year to $838 million.
Net revenues in Deere’s Financial Services division were $28 million in the reported quarter, down 87% year over year. The downside was primarily caused by less-favorable financing spreads and a higher provision for credit losses.
Financial Update
Deere reported cash and cash equivalents of $3,587 million at the end of second-quarter fiscal 2023 compared with $3,878 million recorded at the year-ago quarter’s end. Cash utilized in operating activities was $147 million in the first half of fiscal 2023 compared with $1,762 million in the prior-year period. At the end of the quarter, the long-term borrowing was nearly $36 billion compared with $32 billion in the year-ago quarter’s end.
Guidance
Deere expects net income for fiscal 2023 to be between $9.25 billion and $9.50 billion, up from the previously disclosed guidance of $8.75-$9.25 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 20% in fiscal 2023 from the prior-year quarter’s reported level. Sales of Small Agriculture & Turf are expected to be flat to up 5%. Sales of Construction & Forestry are projected to be up 10-15%.
Price Performance
Deere’s shares have gained 1.6% in the past year compared with the industry’s growth of 0.3%.
Worthington Industries has an average trailing four-quarter earnings surprise of 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share, up 17.7% in the past 60 days. WOR has gained 30.6% in the past year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share, up 63.5% in the past 60 days. MTW’s shares have gained 35.2% in the past year.
The Zacks Consensus Estimate for AptarGroup’s 2023 earnings per share is pegged at $4.15, up 8% in the past 60 days. ATR has a trailing four-quarter average earnings surprise of 6.4%. ATR has gained 15% in the last year.
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Deere (DE) Q2 Earnings & Revenues Top Estimates, '23 View Raised
Deere & Company (DE - Free Report) reported second-quarter fiscal 2023 (ended Apr 30) earnings of $9.65 per share, beating the Zacks Consensus Estimate of $8.57. The bottom line increased 42% from the prior-year quarter’s levels. Continued strength in demand despite supply-chain constraints contributed to the bottom line.
Net sales of equipment operations (comprising Agriculture and Turf, Construction and Forestry) were $16,079 million, up 33.6% year over year. Revenues topped the Zacks Consensus Estimate of $14,845 million. Total net sales (including financial services and others) were $17,387 million, up 30% year over year.
Operational Update
The cost of sales in the reported quarter was up 20.3% year over year to $10,730 million. Total gross profit increased 49.5% year over year to $6,657 million. Selling, administrative and general expenses rose 42.7% to $1,330 million from the prior-year period’s levels.
Total operating profit (including financial services) was up 46% year over year to $3,898 million in the fiscal second quarter.
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 53% year over year to $7,822 million, primarily driven by higher shipment volumes and price realization. Operating profit increased 105% year over year to $2,170 million.
Small Agriculture & Turf sales rose 16% to $4,145 million from the year-earlier quarter’s levels. Segmental sales benefited from price realization and higher shipment volume offset by the unfavorable impact of currency translation. Operating profit rose 63% year over year to $849 million.
Construction & Forestry sales were $4,112 million, up 23% year over year, backed by higher shipment volumes and price realization. Operating profit increased 3% year over year to $838 million.
Net revenues in Deere’s Financial Services division were $28 million in the reported quarter, down 87% year over year. The downside was primarily caused by less-favorable financing spreads and a higher provision for credit losses.
Financial Update
Deere reported cash and cash equivalents of $3,587 million at the end of second-quarter fiscal 2023 compared with $3,878 million recorded at the year-ago quarter’s end. Cash utilized in operating activities was $147 million in the first half of fiscal 2023 compared with $1,762 million in the prior-year period. At the end of the quarter, the long-term borrowing was nearly $36 billion compared with $32 billion in the year-ago quarter’s end.
Guidance
Deere expects net income for fiscal 2023 to be between $9.25 billion and $9.50 billion, up from the previously disclosed guidance of $8.75-$9.25 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 20% in fiscal 2023 from the prior-year quarter’s reported level. Sales of Small Agriculture & Turf are expected to be flat to up 5%. Sales of Construction & Forestry are projected to be up 10-15%.
Price Performance
Deere’s shares have gained 1.6% in the past year compared with the industry’s growth of 0.3%.
Image Source: Zacks Investment Research
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) , The Manitowoc Company, Inc. (MTW - Free Report) and AptarGroup, Inc. (ATR - Free Report) . WOR and MTW flaunt a Zacks Rank #1 (Strong Buy) at present, while ATR 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 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share, up 17.7% in the past 60 days. WOR has gained 30.6% in the past year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share, up 63.5% in the past 60 days. MTW’s shares have gained 35.2% in the past year.
The Zacks Consensus Estimate for AptarGroup’s 2023 earnings per share is pegged at $4.15, up 8% in the past 60 days. ATR has a trailing four-quarter average earnings surprise of 6.4%. ATR has gained 15% in the last year.