Deere (DE) Q4 Earnings Top Estimates, Rise Y/Y on Solid Demand
Deere & Company DE reported fourth-quarter fiscal 2022 (ended Oct 31, 2022) earnings of $7.44 per share, beating the Zacks Consensus Estimate of $7.08. The bottom line surged 81% from the prior-year fiscal quarter’s levels as higher shipment volumes and price realization helped offset the steep production and other expenses. DE witnessed strong demand for both the farm and construction equipment.
Net sales of equipment operations (comprising Agriculture and Turf, Construction and Forestry) were $14.3 billion, up 40% from the prior-year fiscal quarter’s levels. Revenues beat the Zacks Consensus Estimate of $13.6 billion. Total net sales (including financial services and others) were $15.5 billion, up 37% from the year-earlier fiscal quarter’s reading.
Operational Update
The cost of sales in the reported quarter was up 31% from the prior-year fiscal quarter’s reading to $10.1 billion. Total gross profit in the reported quarter surged 68% from the prior-year fiscal quarter’s levels to $4.1 billion. Selling, administrative and general expenses rose 27% to $1,192 million from the prior-year fiscal period’s levels.
Deere & Company Price, Consensus and EPS Surprise
Deere & Company price-consensus-eps-surprise-chart | Deere & Company Quote
Total operating profit (including financial services) surged 75% from the prior-year fiscal quarter’s levels to $2,957 million in the fiscal fourth quarter.
Segmental Performance
The Production & Precision Agriculture segment’s sales rose 59% from the prior-year fiscal quarter’s levels to $7,434 million, primarily owing to higher shipment volumes and price realization. Operating profit in the segment surged 124% from the prior-year fiscal quarter’s tally to $1,740 million. Gains from higher shipment volumes and price realization were offset by escalated production costs, higher R&D and SA&G expenses, and the impact of higher reserves on the remaining assets in Russia.
Small Agriculture & Turf sales rose 26% to $3,544 million from the year-earlier fiscal quarter’s levels due to higher shipment volumes and price realization, partially offset by the unfavorable impact of currency translation. The segment’s operating profit rose 46% from the prior-year fiscal quarter’s levels to $506 million, mainly aided by price realization and improved shipment volumes, partially offset by elevated production costs, higher R&D and SA&G expenses, and the unfavorable effects of foreign exchange.
Construction & forestry segment sales were $3,373 million, up 20% from the prior-year fiscal quarter’s levels, backed by price realization and higher volumes, partially offset by the negative effects of currency translation. The segment’s operating profit was up 53% from the prior-year fiscal quarter’s levels to $414 million on the back of price realization and increased sales volume. However, higher production costs and the impact of higher reserves on the remaining assets in Russia dampened these gains.
Net revenues in Deere’s Financial Services division were $988 million in the reported quarter compared with the prior-year fiscal quarter’s $869 million. The segment’s operating profit amounted to $297 million, down 1% from the year-ago fiscal quarter’s levels.
Financial Update
Deere reported cash and cash equivalents of $4.8 billion at the end of fiscal 2022 compared with $8 billion recorded at the end of the prior fiscal year. Cash generated from operating activities was $4.7 billion in fiscal 2022 compared with $7.7 billion in the earlier fiscal year. At the end of fiscal 2022, the long-term borrowing was $33.6 billion, up from $33 billion at the end of fiscal 2021.
Fiscal 2022 Performance
Deere’s earnings improved 23% from the prior-year fiscal quarter’s reading to $23.28 per share in fiscal 2022, surpassing the Zacks Consensus Estimate of $22.88. In fiscal 2022, net sales of equipment operations were $47.9 billion, up 21% from the prior-year fiscal quarter’s levels. Revenues beat the Zacks Consensus Estimate of $47.6 billion. Total net sales (including financial services and others) were $52.6 billion, up 19% from the prior-year fiscal quarter’s number.
Outlook
Deere expects net income for fiscal 2023 between $8 billion and $8.5 billion compared with $7.1 billion in fiscal 2022. Favorable farm fundamentals and increased investment in infrastructure will drive demand for DE’s equipment.
Net sales for Production & Precision Agriculture are expected to register sales growth in the 15-20% range in fiscal 2023 from the prior-year fiscal quarter’s levels. Sales growth for Small Agriculture & Turf is expected to be flat to up 5% and for Construction & forestry to be up around 10%.
Price Performance
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Shares of Deere have gained 19.2% in the past year compared with the industry’s growth of 17.1%.
Zacks Rank & Stocks to Consider
Deere currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the Industrial Products sector are Hubbell HUBB, OI Glass OI and Titan International TWI. While HUBB and OI flaunt a Zacks Rank #1 (Strong Buy), TWI carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hubbell has an estimated current-year earnings growth rate of 29.3% from the year-ago reported figure. The earnings estimates have been revised 6.6% upward in the past 60 days. HUBB has an average trailing four-quarter earnings surprise of 10.6%. Its shares have gained 22.5% over the past year.
OI Glass’ earnings surprise in the last four quarters was 14.9%, on average. In the past 60 days, its earnings estimates have increased 14.3% for 2022. For the ongoing year, the bottom line is estimated to grow 6.1% from the previous-year level. The OI stock has gained 41% in the past year.
Titan International delivered a trailing four-quarter earnings surprise of 49.6%, on average. Current-year earnings are estimated to grow 161.1% from the year-ago reported figure. TWI’s shares have risen 90.4% in the past year.
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