Deere & Company
) is scheduled to announce its fourth quarter and fiscal 2012
results on November 21, 2012. The current Zacks Consensus
Estimate for the quarter is $1.88, reflecting a year-over-year
growth of 16%.
The Zacks Consensus Estimate for the current fiscal stands at
$7.76, an estimated annual growth of 17%. The Zacks Consensus
revenue estimate is $8842 million for the quarter and $33.476
billion for fiscal 2012.
With respect to earnings surprise, Deere has outperformed the
Zacks Consensus Estimate in three of the last four quarters. The
average earnings surprise was 1.45%, implying that the company
has surpassed the Zacks Consensus Estimate by the same magnitude
over the same period.
Previous Quarter Recap
Deere's third quarter fiscal 2012 earnings were $1.98 per
share compared with $1.69 per share earned a year ago. Earnings
missed the Zacks Consensus Estimate of $2.32 per share. Deere's
worldwide sales increased 15% year over year to $9.59 billion,
beating the Zacks Consensus Estimate of $9.49 billion.
Deere expects equipment sales to grow around 13%, down from
15% in fiscal 2012. The guidance includes an unfavorable
currency-translation impact of 4% for the quarter and 3% for the
year. Net income is projected at $3.1 billion, down from the
previous expectation of $3.35 billion.
Segment-wise, Deere expects worldwide sales of Agriculture and
Turf equipment to grow by 13%, down from the previous guidance of
15% for full-year 2012, which includes a 4% negative impact of
foreign currency translation.
Region-wise, Deere expects industry farm-machinery sales in
the U.S. and Canada to grow by more than 10% for 2012. While
sales in Western and Central Europe are expected to be flat;
sales in the Commonwealth of Independent States are expected to
witness strong growth. Growth in Asia is expected to be down
moderately due to soft markets in China and India.
In South America industry sales are expected to be down by
5%-10%, due to uncertainty and drought conditions prevailing in
Argentina. Industry sales of turf and utility equipment in the
U.S. and Canada are expected to be flat to up 5%, driven by
drought conditions in the U.S.
Construction and Forestry equipment are expected to improve
17% for 2012, while world forestry markets would be flat year
over year. Net income from Financial Services is estimated at
$450 million, down from $465 million projected earlier.
Estimate Revision Trend
For the fourth quarter of fiscal 2012, of the 16 estimates
available, two and one estimates have been revised upward in the
last 30 days and 7 days, respectively. For the fiscal 2012, of
the 18 estimates available for Deere, only one estimate has gone
up in the past 30 days and in the past seven days. The lack of
any major movement in estimates suggests the absence of any major
catalyst driving the quarter's results.
Magnitude of Estimate Revisions
The consensus earnings estimate for the fourth quarter of
fiscal 2012 inched up a cent to $1.88 in last 7 days. Estimates
also grew by a penny over the last 30 days. For fiscal 2012,
there were no movement is estimates in the last 7 and 30 day
The United States Department of Agriculture forecasts net farm
income to exceed $122 billion and net cash income is envisaged to
go beyond $139 billion in 2012. These forecasts, if realized,
represent all-time record levels.
Furthermore, recent figures suggest a turnaround in the
construction sector. According to the American Institute of
Architects, after languishing in the negative territory for five
consecutive months, the architecture billing index (ABI) climbed
back into the positive territory with a score of 50.2 in August.
ABI is an economic indicator which provides an approximate nine-
to twelve-month glimpse into the future of non-residential
construction spending activity and any score of above 50 is
significant as it indicates an increase in billings.
In September, the score further improved to 51.6, the highest
in nearly two years. Both housing starts and building permits
were record high in four years. These figures are reflective of
the fact that U.S. residential construction is finally
stabilizing and is on the road to a much awaited recovery. This,
in turn, will improve demand for Deere's construction equipment
Due to production hang-ups, delivery of some farm gear was
delayed in the third quarter. This led to some farmers cancelling
their orders as the equipment wouldn't have arrived before the
harvest. Thus inventory levels increased and remain a headwind
for the company in the fourth quarter.
However, margin expansion will be constrained in the next
quarter given the increased costs for the Interim Tier 4
technologies and products, and higher research and development
expenses. The new products introduced by Deere have to comply
with the stringent engine emission regulations in North America
and Europe. Deere expects the cost in fiscal 2012 to be $475
million higher than the fiscal 2011 levels, thereby, contracting
Deere retains a Zacks #3 Rank (short-term Hold rating).
Illinois-based Deere, 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 companies like
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