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Deere (DE) to Report Q1 Earnings: What's in the Offing?

Zacks Equity Research

Deere & Company DE is scheduled to report first-quarter fiscal 2019 results on Feb 15, before the market opens.


In the last reported quarter, Deere reported earnings of $2.30 per share, which missed the Zacks Consensus Estimate by around 6%. In the trailing four quarters, the company missed the Zacks Consensus Estimate on three occasions while surpassing in one. The company recorded average negative earnings surprise of 1.26% over the trailing four quarters.


Let’s see how things are shaping up prior to this announcement.

Deere & Company Price and EPS Surprise

Deere & Company Price and EPS Surprise

Deere & Company price-eps-surprise | Deere & Company Quote

Key Factors to Consider

In the Agriculture and Turf segment, replacement demand continues to drive order activity. The Zacks Consensus Estimate indicates that net sales of Deere’s Agriculture and Turf equipment segment will reach $4.4 billion in the quarter to be reported, rising around 4% year over year. The Agriculture and Turf equipment segment’s operating income is projected at $424 million, up from the $387 million reported in the prior-year quarter.


The Construction & Forestry segment will benefit from continued robust demand for equipment, as well as the Wirtgen acquisition. The economic environment for the construction, forestry and road building industries looks solid and continues to support elevated demand for both new and used equipment. The Zacks Consensus Estimate for Construction & Forestry segment sales is pegged at $2.45 billion for the to-be-reported quarter, reflecting year-over-year improvement of 41%. The Construction & Forestry segment is expected to report operating profit of $247 million, a substantial improvement over $32 million in prior-year quarter.


Net sales of equipment operations (which comprise Agriculture and Turf, Construction and Forestry) are projected at $6.89 billion, a 15% improvement year over year. 


The estimate for the Financial Services segment’s sales is $817 million, reflecting year-over-year increase of 5%.


Notably, the Zacks Consensus Estimate for earnings per share is pegged at $1.80 for the to-be-reported quarter, indicating year-over-year growth of 37.4%. Deere’s pricing actions are likely to mitigate the impact of rising raw material prices, higher freight cost and elevated expenses. Further, improved operational performance, cost management and continued investment in innovative technology and solutions will drive the company’s performance.


Earnings Whispers


Our proven model does not conclusively show that Deere is likely to beat on earnings this quarter as it does not possess the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. This is not the case here as you will see below:  


Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate Estimate of $1.74 and the Zacks Consensus Estimate of $1.80, is -3.40%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.


Zacks Rank: Deere currently carries a Zacks Rank of 3. While this increases the predictive power of ESP, we also need to have a positive ESP to be confident about an earnings surprise.


It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.


Share Price Performance



Deere’s shares have gained 2.3% over the past year against the industry’s decline of 0.7%.  


Stocks Worth a Look


Here are a few stocks worth considering as these have the right combination of elements to post an earnings beat this quarter.


Lincoln Electric Holdings, Inc. LECO has an Earnings ESP of +1.42% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.


Zebra Technologies Corporation ZBRA has an Earnings ESP of +5.18% and a Zacks Rank #3.


LSC Communications LKSD has an Earnings ESP of +9.09% and a Zacks Rank #3.


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