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Deere tops earnings estimates, misses on revenue

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Yahoo Finance Live anchors discuss second-quarter earnings for Deere.

Video Transcript

JULIE HYMAN: Let's talk about some of the individual movers that we are watching as well as we get underway this morning. A lot of them reflecting the themes that we've been talking about so much during this earnings season.

Deere, let's start there. The big equipment-maker beating earnings expectations but missing in terms of revenue in the latest quarter. And guess what, I'm going to say it again, supply chain pressures. If you've been drinking every time we say supply chain pressures during this show, phew, you're getting an early start to your weekend, aren't you? So they talked about those pressures affecting production levels and delivery schedules.

So the company says demand for farm equipment is going to continue to benefit from positive fundamentals. That's according to CEO John May in the statement here. And those positive fundamentals have to do with what we've been seeing in prices in the commodity market, right? There's a lot of demand for grains right now, for agricultural products. Prices have been going higher.

And so perhaps some of these farmers who are a lot of Deere's main customers are a little more flush when it comes to spending on equipment. But if they can't get the equipment, it doesn't matter if they have the money to spend on the equipment.

BRAD SMITH: Yeah, you look at the price activity on the stock and on the shares today for Deere. And coming into this report, they were actually still holding onto some net gains year to date. However, with this move lower, it seems like that's going to push them back into negative territory for the year.

There you're looking at the past three months, down by about 7%. But they continue to talk about this smart industrial strategy and the leap ambitions. I think at the end of the day, even with some of the net sales and revenues increase of 11% for the second quarter, the investors really just want to hear how you're going to continue to produce the number of manufacturing equipment items that the market is increasingly demanding and how you're going to get them to those consumers as well, to the users of those industrial products at a time where we do know the supply chain, even in farming, has been hampered as well.

And so all of those things considered, those directly impact this company, how they're going to see order demand continue to tick up. That continues to remain in question.

JULIE HYMAN: Yeah, I haven't had a chance to take a listen or look at the earnings call for this company. But it's really interesting to me. You hear Deere and Applied Materials kind of coming out with the same message. Demand is there, supply is not.

Deere is down 6%. When we looked at Applied Materials earlier, it wasn't moving much at all. So I want to dig into these details here to see what exactly is the difference in the narrative between the two companies.

BRAD SMITH: Higher production costs, as you mentioned, higher research and development, and selling administrative general expenses, all of those as a direct headwind for this company right now.

JULIE HYMAN: Now, I do know that Deere has been pushing more into sort of smart ag tech, if you will, right?

BRAD SMITH: Yes.

JULIE HYMAN: And so those things require chips, probably more than they used to, in a tractor, just like we're putting more chips in cars than we used to. And so I wonder if there's some chip supply issues affecting it there.

BRAD SMITH: Absolutely.

JULIE HYMAN: I don't know. We'll keep watching it.