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Deere's (DE) Earnings & Revenues Beat Estimates in Q3
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Deere & Company (DE - Free Report) posted third-quarter fiscal 2020 (ended Aug 2, 2020) earnings of $2.57 per share, beating the Zacks Consensus Estimate of $1.30. The reported figure, however, declined 8.5% from the prior-year quarter.
Net sales of equipment operations (which comprise Agriculture and Turf, Construction and Forestry) came in at $7.86 billion, declining 12.4% year over year. Revenues, however, surpassed the Zacks Consensus Estimate of $6.64 billion. Total net sales (including financial services and others) came in at $8.92 billion, down 11% year over year.
Operational Update
Cost of sales in the reported quarter was down 15% year over year to $5.8 billion. Total gross profit for the reported quarter fell 2.4%, year over year, to $3.01 billion. Selling, administrative and general expenses dipped 16% to $752 million from the prior-year quarter. Equipment operations reported an operating profit of $1,147 million in the quarter compared with the $990 million witnessed in the prior-year quarter. Total operating profit (including financial services) increased 16% year over year to $1,390 million in the fiscal third quarter.
The Agriculture & Turf segment’s sales was down 5% year over year to $5.67 billion, primarily due to lower shipment volumes and an unfavorable currency-translation impact, partly offset by price realization. Operating profit in the segment climbed 54% year over year to $942 million, resulting from price realization, and lower selling, administrative, and general expenses. However, this was offset by unfavorable impact of foreign-currency exchange, lower shipment volumes/sales mix as well as impairments and closure costs.
Construction & Forestry sales slid 28% to $2.19 billion from the year-earlier quarter on lower shipment volumes and unfavorable foreign-currency translation, partly negated by price realization. This segment’s operating profit plummeted 46% year over year to $205 million, mainly due to a lower shipment volumes/sales mix, partly offset by price realization and lower selling, administrative, and general expenses.
Net revenues in Deere’s Financial Services division came in at $892 million in the reported quarter, down 2% year on year. The segment’s operating profit came in at $243 million, up 19% year over year.
Financial Update
Deere reported cash and cash equivalents of $8.2 billion at the end of the fiscal third quarter 2020 compared with the $3.4 billion recorded at the end of the prior-year quarter. Cash generated from operating activities were $4,057 million in the nine-month period ended Aug 2, 2020 compared with the $404 million witnessed in the prior-year period. At the end of the reported quarter, long-term borrowing was $34 billion, up from the $29 billion witnessed at the year-ago quarter’s end.
Outlook
Net income for fiscal 2020 is projected at $2.25 billion. However, the company has stated that uncertainties regarding the impact of the COVID-19 pandemic might affect results.
Deere expects Agriculture and Turf equipment sales to be down 10% for fiscal 2020. The Construction and Forestry equipment segment’s sales are expected to be down 25% for the fiscal year. The outlook reflects market uncertainty due to the pandemic as well as efforts to bring down field inventory levels.
Additionally, the company has announced broad employee-separation programs that will be completed during the fiscal fourth quarter in support of its strategy to create a leaner, more agile organization. The program is expected generate annual savings of $175 million.
Price Performance
Deere’s shares have appreciated 23.4% over the past year, outperforming the industry’s growth of 20.4%.
Silgan has a projected earnings growth rate of 28.7% for 2020. The company’s shares have gained 22% so far this year.
IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 37% in the past year.
SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has appreciated 41% year to date.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
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Deere's (DE) Earnings & Revenues Beat Estimates in Q3
Deere & Company (DE - Free Report) posted third-quarter fiscal 2020 (ended Aug 2, 2020) earnings of $2.57 per share, beating the Zacks Consensus Estimate of $1.30. The reported figure, however, declined 8.5% from the prior-year quarter.
Net sales of equipment operations (which comprise Agriculture and Turf, Construction and Forestry) came in at $7.86 billion, declining 12.4% year over year. Revenues, however, surpassed the Zacks Consensus Estimate of $6.64 billion. Total net sales (including financial services and others) came in at $8.92 billion, down 11% year over year.
Operational Update
Cost of sales in the reported quarter was down 15% year over year to $5.8 billion. Total gross profit for the reported quarter fell 2.4%, year over year, to $3.01 billion. Selling, administrative and general expenses dipped 16% to $752 million from the prior-year quarter. Equipment operations reported an operating profit of $1,147 million in the quarter compared with the $990 million witnessed in the prior-year quarter. Total operating profit (including financial services) increased 16% year over year to $1,390 million in the fiscal third quarter.
Deere Company Price, Consensus and EPS Surprise
Deere Company price-consensus-eps-surprise-chart | Deere Company Quote
Segment Performance
The Agriculture & Turf segment’s sales was down 5% year over year to $5.67 billion, primarily due to lower shipment volumes and an unfavorable currency-translation impact, partly offset by price realization. Operating profit in the segment climbed 54% year over year to $942 million, resulting from price realization, and lower selling, administrative, and general expenses. However, this was offset by unfavorable impact of foreign-currency exchange, lower shipment volumes/sales mix as well as impairments and closure costs.
Construction & Forestry sales slid 28% to $2.19 billion from the year-earlier quarter on lower shipment volumes and unfavorable foreign-currency translation, partly negated by price realization. This segment’s operating profit plummeted 46% year over year to $205 million, mainly due to a lower shipment volumes/sales mix, partly offset by price realization and lower selling, administrative, and general expenses.
Net revenues in Deere’s Financial Services division came in at $892 million in the reported quarter, down 2% year on year. The segment’s operating profit came in at $243 million, up 19% year over year.
Financial Update
Deere reported cash and cash equivalents of $8.2 billion at the end of the fiscal third quarter 2020 compared with the $3.4 billion recorded at the end of the prior-year quarter. Cash generated from operating activities were $4,057 million in the nine-month period ended Aug 2, 2020 compared with the $404 million witnessed in the prior-year period. At the end of the reported quarter, long-term borrowing was $34 billion, up from the $29 billion witnessed at the year-ago quarter’s end.
Outlook
Net income for fiscal 2020 is projected at $2.25 billion. However, the company has stated that uncertainties regarding the impact of the COVID-19 pandemic might affect results.
Deere expects Agriculture and Turf equipment sales to be down 10% for fiscal 2020. The Construction and Forestry equipment segment’s sales are expected to be down 25% for the fiscal year. The outlook reflects market uncertainty due to the pandemic as well as efforts to bring down field inventory levels.
Additionally, the company has announced broad employee-separation programs that will be completed during the fiscal fourth quarter in support of its strategy to create a leaner, more agile organization. The program is expected generate annual savings of $175 million.
Price Performance
Deere’s shares have appreciated 23.4% over the past year, outperforming the industry’s growth of 20.4%.
Zacks Rank & Other Stocks to Consider
Deere currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the Industrial Products sector include Silgan Holdings, Inc. (SLGN - Free Report) , IIVI Incorporated and SiteOne Landscape Supply, Inc. (SITE - Free Report) , each sporting a Zacks Rank #1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.
Silgan has a projected earnings growth rate of 28.7% for 2020. The company’s shares have gained 22% so far this year.
IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 37% in the past year.
SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has appreciated 41% year to date.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>