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What's In Store for Deere's (DE) Quarterly Earnings This Week?

Benjamin Rains
Is (AMTD) Outperforming Other Finance Stocks This Year?

Deere & Company DE saw its stock price dip on Tuesday as the company inches closer to the release of its quarterly financial results on Friday. This could be a sign that investors are nervous about the agricultural and construction equipment powerhouse. Let’s take a look to see what they should really expect.

Deere stock is up nearly 29% over the last year, but its stock price has sunk 13.4% during the last 12 weeks. This fall has seen Deere’s valuation become more attractive. Deere is currently trading at 13.9X forward 12-months earnings estimates, which marks a substantial discount to its 18.8X median and the 19.6X that it was trading at in early March.  

However, the company is coming off a GAAP net loss in its first fiscal quarter of 2018. With that said, Deere could quickly start to reverse its recent decline if it reports strong top and bottom line results  

Deere Q2 Outlook

Our current Zacks Consensus Estimate is calling for Deere’s quarterly revenues to surge 34.3% to reach $9.75 billion. Turning to earnings, the equipment giant is projected to report adjusted earnings of $3.33 per share. This would also mark a nearly 34% climb from the year-ago period.

These are both positive signs for investors, but they will still want to understand if Deere is likely to beat or fall short of quarterly earnings estimates. The reason being is that a bottom line beat can often positively impact a company’s stock price in the near-term and propel shares going forward. Luckily, Zacks Premium customers can utilize the Earnings ESP Screener in order to search for stocks that are expected to surprise, either way.

This is done because, generally speaking, when an analyst posts an estimate right before an earnings release, it means that they have fresh information which could potentially be more accurate than what analysts thought about a company two or three months ago.

A positive Earnings ESP paired with a Zacks Rank #3 (Hold) or better ranking helps us feel confident about the potential for an earnings beat. In fact, our 10-year backtest has revealed that this methodology has accurately produced a positive surprise 70% of the time.

In contrast, a stock with a Zacks Rank #3 (Hold) or worse, coupled with a negative Earnings ESP, is one that we typically want to avoid during earnings season.

Deere’s Most Accurate Estimate—the representation of the most recent analyst sentiment—calls for earning of $3.27 per share, which comes in 6 cents below our current consensus estimate. The company is also currently a Zacks Rank #3 (Hold) and sports an Earnings ESP of -1.77%.

Therefore, investors can consider Deere a stock that could fall short of quarterly earnings estimates when it reports its Q2 financial results before the market opens on Friday.

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