Shares of Deere & Company DE have fallen well over 12% since May 5 on the back of renewed U.S./China trade war worries. DE stock then tumbled over 6% on Monday, while the Dow sank on significant declines from Caterpillar CAT, Boeing BA, Home Depot HD, and other giants.
New tariffs and heightened trade fears won’t negatively impact Deere’s soon-to-be-released quarterly financial results. Still, it is worth seeing what to do with DE stock before the manufacturing and farm equipment power reports its Q2 fiscal 2019 earnings before the opening bell Friday.
Deere’s first-quarter 2019 earnings fell well short of Wall Street estimates even though the company’s revenues popped 16% and surpassed our Zacks Consensus Estimate. Aside from the overall top and bottom-line results, investors were likely nervous to see that higher logistics and raw material costs—including steel—negatively impacted Deere. Meanwhile, customer concerns regarding tariffs and the larger trade fight between the U.S. and China hurt the firm.
More specifically, Deere noted that it saw fewer early orders and farmers seemed more nervous than most because China is such an important market for many U.S. farmers. The Moline, Illinois-based firm said that clients have delayed their purchases in order to see where the current trade fight heads. Deere’s CEO Samuel Allen in mid-February was “cautiously optimistic” about his company’s prospects for the year ahead. Until recently, Deere looked as though it would get what it hoped for in terms of clarity regarding the trade dispute between the world’s two largest economies.
Deere and the broader market have, of course, seen the trade fight escalate over the last two weeks. The renewed uncertainty hasn’t helped DE stock, which is down big in May. Shares of Deere are now down around 3% in 2019 and come in flat over the past 12 months. Shares of Deere closed regular trading down 6.21% to $146.36 per share on Monday. This represented a roughly 14% downturn compared to its 52-week intraday high of $169.99 per share.
With that said, investors will notice that DE stock has outpaced its industry’s average—which includes Kubota Corp. KUBTY, AGCO Corporation AGCO, Titan International, Inc. TWI, Briggs & Stratton Corporation BGG—during the last three years.
Q2 2019 Outlook & Earnings Trends
Looking ahead, Deere’s second-quarter fiscal 2019 revenue is projected to pop 4.1% to hit $10.15 billion, based on our current Zacks Consensus Estimate. This anticipated growth would come up well short of Q1’s 16% top-line expansion. Meanwhile, the company’s full-year fiscal 2019 revenue is projected to jump 6.6% from $33.35 billion in 2018 to touch $35.54 billion.
Moving onto the bottom end of the income statement, the manufacturing and farm equipment firm is projected to see its adjusted quarterly earning pop 13.7% to $3.57 per share. The company’s Q3 2019 EPS figure is expected to pop 25.5%. Peeking further ahead, DE’s adjusted full-year earnings are projected to climb nearly 19%. Plus, the company’s 2020 EPS figure is expected to come in 11% higher than our current-year estimate.
Along with Deere’s solid bottom-line growth prospects, the firm has seen some mixed earnings estimate revision activity recently, with its longer-term estimates down slightly over the past 60 days. Furthermore, the company has missed quarterly earnings estimates over the trailing four periods, for an -8.1% average surprise.
Deere is a Zacks Rank #3 (Hold) at the moment and its quarterly earnings and revenue is projected to climb this quarter and in fiscal 2019 and 2020. DE is also currently trading at 13.2X forward 12-month Zacks Consensus EPS estimates. This marks a discount compared to its industry’s 15.3X average and its own five-year high of 26.4X and its five-year median of 17.1X. Plus, its price/sales ratio of 1.3 only comes in a bit higher than its industry’s 0.90 average, and it is a dividend payer, with a 1.95% yield at the moment.
Yet, investors might want to wait to see how Wall Street reacts to the company’s actual quarterly results. More importantly, it will be key to pay attention to Deere’s guidance and any information executives provide about how the U.S./China trade war might impact its business.
Deere is scheduled to report its Q2 fiscal 2019 financial results before the opening bell on Friday, May 17. Make sure to come back to Zacks for a full breakdown of the company’s actual metrics.
Investors should also note that fellow industry bellwethers Macy’s M and Walmart WMT also report their quarterly results this week (also read: Buy Walmart Stock Ahead of Q1 Fiscal 2020 Earnings Thursday?)
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The Boeing Company (BA) : Free Stock Analysis Report
The Home Depot, Inc. (HD) : Free Stock Analysis Report
Caterpillar Inc. (CAT) : Free Stock Analysis Report
Deere & Company (DE) : Free Stock Analysis Report
AGCO Corporation (AGCO) : Free Stock Analysis Report
Briggs & Stratton Corporation (BGG) : Free Stock Analysis Report
Titan International, Inc. (TWI) : Free Stock Analysis Report
Kubota Corp. (KUBTY) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
Macy's, Inc. (M) : Free Stock Analysis Report
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