Deere & Company
) is scheduled to announce its second quarter fiscal 2012 results
on May 16, 2012. The current Zacks Consensus Estimate is $2.54 for
the quarter, projecting year-over-year growth of 12.06%. The
estimates in the current Zacks Consensus range between a low of
$2.40 and a high of $2.73 a share. The Zacks Consensus Estimate for
revenue is $9.67 billion for the quarter under discussion.
Over the trailing four quarters, Deere outperformed the Zacks
Consensus Estimate, booking a positive earnings surprise. The
average earnings surprise was 5.21%, implying that Deere has
surpassed the Zacks Consensus Estimate by that measure over the
last four quarters.
Previous Quarter Recap
Deere's first-quarter earnings per share (EPS) of $1.30 beat the
Zacks Consensus Estimate of $1.23 and climbed 8% year over year,
largely driven by strong demand for farm machinery as well as
increased sales of construction equipment.
Deere's worldwide total sales increased 11% year over year to
$6.77 billion, beating the Zacks Consensus Estimate of $6.49
billion. Net sales of equipment operations (which comprise
Agriculture and Turf, Construction and Forestry) were $6.1 billion,
an 11% year-over-year increase including a price increase of 4% and
an unfavorable currency translation effect of 1%. On a geographical
basis, equipment net sales were up 5% in the United States and
Canada and 21% in the rest of the world.
Deere expects equipment sales to grow around 15% in fiscal 2012.
The guidance includes an unfavorable currency-translation impact of
3%. Net income is estimated at $3.275 billion. Segment-wise, Deere
expects worldwide sales of Agriculture and Turf equipment to grow
by 15% for full year 2012, benefiting from favorable global farm
conditions. The segment will also gain from the worldwide
introduction of advanced new products and major expansion projects
particularly in the emerging markets.
Construction and Forestry Equipment sales are expected to
improve 18% for 2012, reflecting slightly improved market
conditions and activity outside the U.S. and strength in Canada.
Construction Equipment sales to independent rental companies are
expected to improve further. Sales growth would also emerge from
the launch of new products and geographic expansion.
Net income from Financial Services is estimated at $460 million.
Region-wise, Deere expects industry farm-machinery sales in the
U.S. and Canada to grow 10% for 2012. Western and Central Europe
are expected to be flat to up 5%. Sales in the Commonwealth of
Independent States are expected to see moderate gains while growth
in Asia is expected to be strong. Industry sales of turf and
utility equipment in the U.S. and Canada are expected to increase
Estimate Revision Trend
For the second quarter, only one of the 15 analysts covering
Deere has reduced estimate over the past 30 days. For fiscal 2011,
only one estimate out of 15 has been trimmed for Deere. There has
been no movement in estimates for the second quarter of fiscal 2012
in the past 7 days. The limited number of estimate revisions
indicates the absence of any major catalyst driving the quarterly
Magnitude of Estimate Revisions
The consensus earnings estimate for the second quarter of fiscal
2012 inched up a cent to $2.54 following Deere's upbeat first
quarter results. There has been no movement since then. For fiscal
2012, the estimate had gone up 23 cents to $8.01 following the
results. In the past 30 days the consensus slipped a cent to $8.00.
There has been no movement in the past 7 days.
The United States Department of Agriculture forecasts net farm
income to be at $91.7 billion in 2012. It is expecting a record
corn crop of 48 million tons this year, up 4.5 million tons year on
year and the largest yield in the last 75 years. This bullish trend
is seen the world over with global corn production estimated to
rise 10% with several countries posting record yield. This will
encourage farmers to invest in the latest machinery to maximize
productivity, favoring Deere and other companies in this space.
U.S. crop prices will remain strong in 2012 due to vigorous
global demand and a tight supply scenario. Additionally, equipment
demand will remain strong in FY12. Deere's equipment demand model
depends on current year and prior year cash receipts. U.S. farm
cash receipts in 2011 were 16% higher than the previous record of
2008. Therefore, equipment demand in 2012 will rise driven by
record farm receipts in 2011 and a comparable pace in
Besides, Deere has been growing its manufacturing footprint
overseas in markets such as China, Brazil, Russia and India. The
expansion into the emerging markets should provide long-term growth
opportunities. Population growth and rising living standards in the
emerging markets are fueling growth in global food demand. In
addition to growing its footprint in the overseas markets, Deere is
also increasing its focus in the U.S. and Canada. This area
generated nearly 60% of total revenues and about 75% of the
company's profit in 2011.
The company currently retains a Zacks #2 Rank (short-term Buy
Illinois-based Deere & Co. is engaged in the production and
distribution of agricultural and forestry equipment, construction
equipment and engines worldwide. The company sells products in the
U.S. and Canada through branch offices as well as through
distributors and dealers for the resale of products
internationally. Deere competes with
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