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A Tale of Two Earnings Reports: DE and FL

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Friday, May 19th, 2017

Ahead of the bell this Friday — strangely, almost, devoid of any table-resetting headlines related to economic data or tweets from President Trump as he boards Air Force One for the Middle East today — we get to look a little more closely at two retail companies that have reported earnings this morning. Instead of running down a quick checklist of a plethora of companies reporting, as in weeks past, we focus in on mechanical equipment major Deere & Company (DE - Free Report) and specialty retailer Foot Locker, Inc. (FL - Free Report) .

Deere is well known as a tractor builder based in Moline, IL. It’s a Zacks Rank #2 (Buy) stock that has handily beat earnings estimates each quarter over the past year. In fact, in its trailing 4 quarters, Deere has topped estimates by a very impressive 60.5%. This morning the trend continues: Deere & Co. brought in $2.49 per share, well ahead of the Zacks consensus estimate of $1.70 and 62% higher than earnings a year ago. Revenues of $7.26 billion in the quarter also bettered estimates of $7.24 billion.

Guidance for Deere was also better than anticipated: the company expects equipment sales for 2017 to be up 9% and +18% sequentially. Taken together, this has been another strong quarter for the equipment manufacturer, and shares are currently up 6.8% in today’s pre-market. The stock is up more than 9% year to date and +36.6% year over year.

Foot Locker, on the other hand, is suffering from the same industry headwinds as we’ve seen from plenty of other retailers on the tail end of this earnings season. The Zacks Rank #3 (Hold) stock, which had seen its Zacks consensus earnings per share estimate tumble by 9 cents per share in the last 30 days, was still unable to meet estimates of $1.38 per share, posting just $1.36. Revenues also lagged, though relatively insignificantly — $2.00 billion missed the $2.02 billion projected. Earnings are down 2.2% from a year ago, though sales are up 0.7%.

This is the first time since the year-ago quarter that Foot Locker has failed to meet estimates. Over the trailing 4 quarters, earnings have averaged an overall positive surprise of 2.24%. Yet shares of the company have fallen precipitously in today’s pre-market, down 13.8% ahead of the bell. We will check upcoming potential changes to the Zacks Rank and Zacks Style Score in the hours and days to come.

Mark Vickery
Senior Editor

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