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Can Deere’s Fiscal 2Q16 Earnings Shine amid a Gloomy Industry?

Shannon Black

Can Deere Plow Its Way out of the Woods in Fiscal 2Q16?

Upcoming fiscal 2Q16 earnings results

Deere & Company (DE), the world’s largest manufacturer of tractors and harvesting combines, is scheduled to declare earnings for fiscal 2Q16 before markets open on May 20. The quarterly earnings release will give us an important snapshot of the company’s operating performance in the three-month period between February and April.

Among competitors in the agriculture (DBA) and construction (ITB) equipment space, AGCO (AGCO) and Caterpillar (CAT) declared their 1Q16 earnings on April 27 and April 22, respectively. The earnings declared by CAT and AGCO were for the quarter that ended March 31.

Caterpillar’s performance

Caterpillar reported diluted EPS (earnings per share) of $0.67 in 1Q16, which represents a YoY (year-over-year) decline of 68%. The drop in earnings was along expected lines, however. Analysts were expecting EPS of $0.68. Based on overall industry weakness, Caterpillar slashed its sales outlook in 2016 as well, from $42 billion to $40 billion. In line with sales, the company also reduced its previous EPS guidance from $4.0 to $3.7. The company’s stock had already factored in these factors and consequently fell by 0.4% on April 22.

AGCO performance

AGCO’s sales in 1Q16 fell by 8.4% to $1.6 billion as sales from the North America and South America fell by 11% and 21%, respectively. The company is also geographically diversified and therefore suffered a 3% setback from currency exchange headwinds. The company reported EPS of $0.09 as compared with diluted EPS of $0.34 in 1Q15. AGCO’s stock closed 1.4% higher on April 27, however, on the day the company declared its earnings.

Now let’s take a closer look at Deere’s earnings expectations for fiscal 2016.

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