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Deere (DE) to Report Q4 Earnings: What's in the Cards?

SAFM MTN DE AAAP

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Deere & Company (DE - Free Report) is slated to announce fourth-quarter fiscal 2016 results on Nov 23, before the opening bell. Last quarter, Deere’s earnings edged up 1.4% while sales fell 14% year over year.

Let’s see how things are shaping up prior to this announcement.

Factors At Play

Deere projects total equipment sales to decline 10% year over year in fiscal 2016. For fourth-quarter fiscal 2016, sales are likely to deteriorate about 8% from the year-ago quarter. The projection includes a negative currency translation effect of about 2% for the full year and a positive translation effect of about 1% for the fourth quarter. Market demand for construction equipment continues to soften. Further, a weak oil and gas sector, with the impact most pronounced in the energy-producing regions of the U.S. and Canada will impact Deere's results.

For fiscal 2016, the company anticipates net income to be about $1.35 billion. For 2016, Deere projects price realization of about 1 point, favorable raw material costs, lower pension and OPEB expense, and lower incentive compensation expense. Moreover, research and development expenses will be down about 1%. Additionally, the company anticipates selling, administrative and general expense to be down about 5% for the full year. This is likely to contribute to margin expansion.

Earnings Whispers

Our proven model does not conclusively show that Deere will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat consensus estimate. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate is 0.00% for Deere. This is because both the Most Accurate and the Zacks Consensus Estimate are pegged at 36 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: Deere has a Zacks Rank #2. Though a Zacks Rank #2 increases the predictive power of ESP, an ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Surprise History

Deere has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, with an average earnings beat of 32.16%.

DEERE & CO Price and EPS Surprise

 

DEERE & CO Price and EPS Surprise | DEERE & CO Quote

Stocks That Warrant a Look

Here are some stocks worth considering as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Vail Resorts Inc. (MTN - Free Report) has an Earnings ESP of +4.46% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Advanced Accelerator Applications S.A. (AAAP - Free Report) has an Earnings ESP of +55.56% and also sports a Zacks Rank #1.

Sanderson Farms, Inc. (SAFM - Free Report) has an Earnings ESP of +4.48% and flaunts a Zacks Rank #1.

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