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Return On Capital Employed Overview: Deere

Benzinga Insights
·2 min read

Looking at Q2, Deere (NYSE: DE) earned $1.27 billion, a 40.33% increase from the preceding quarter. Deere also posted a total of $9.25 billion in sales, a 41.7% increase since Q1. In Q1, Deere earned $905.00 million, and total sales reached $6.53 billion.

Why ROCE Is Significant

Changes in earnings and sales indicate shifts in Deere’s Return on Capital Employed, a measure of yearly pre-tax profit relative to capital employed in a business. Generally, a higher ROCE suggests successful growth in a company and is a sign of higher earnings per share for shareholders in the future. In Q2, Deere posted an ROCE of 0.11%.

It is important to keep in mind ROCE evaluates past performance and is not used as a predictive tool. It is a good measure of a company's recent performance, but several factors could affect earnings and sales in the near future.

View more earnings on DE

ROCE is an important metric for the comparison of similar companies. A relatively high ROCE shows Deere is potentially operating at a higher level of efficiency than other companies in its industry. If the company is generating high profits with its current level of capital, some of that money can be reinvested in more capital which will lead to higher returns and earnings per share growth.

In Deere's case, the positive ROCE ratio will be something investors pay attention to before making long-term financial decisions.

Q2 Earnings Insight

Deere reported Q2 earnings per share at $2.11/share, which beat analyst predictions of $1.8/share.

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