What to Expect from Deere & Company's (DE) Q3 Earnings

Deere & Company DE is set to report third quarter earnings before the opening bell Friday, August, 16. The agricultural and construction equipment maker has suffered a stagnant year, down 0.5% year-to-date.

DE is coming off a second quarter where its earnings lagged estimates and sales slightly beat. Trade war concerns have loomed over the company’s agricultural sector in 2019. Deere is looking for a solid Q3 report to bolster investor confidence and drive DE stock in the second half of 2019.

Let’s examine the company under the lens of our Zacks estimates to see how Deere might stack up in Q3.

Company Overview and Q2 Recap

Deere is based out of Moline, Illinois and manufactures and distributes equipment for agricultural, forestry, and construction purposes. The company sells products in the United States and Canada through branch offices, distributors and dealers.

DE currently reports operating results under three main segments: Agriculture and Turf, Construction and Forestry, and Financial Services. Concerns stemming from the escalating U.S. and China trade war and lower commodity prices has forced farmers to turn more cautious about their equipment purchases.

In Q2, the company lowered full fiscal year financial guidance. Additionally, DE has lagged behind its broader industry as well as peers such as AGCO Corp AGCO and Kubota KUBTY.

In Q2 2019, the company’s revenue jumped 5.8% to $11.3 billion and earnings fell 4.09% to $3.52 per share. The company’s top line beat our estimate by 1.2% and its bottom line fell short by 1.7%. DE’s profits fell by 6.07% to $1.14 billion.

The company’s Agriculture & Turf segment increased 3% to $7.4 billion, primarily fueled by higher shipment volumes. Construction and Forestry rose 11% to $3.06 billion, and the financial services also jumped 11% to $886 million.

Q3 and Beyond Outlook

In Q3 2019, Zacks Consensus Estimates call for a bottom-line leap of 8.49% to $2.81 per share on the back of a top-line increase of 0.18% to $9.3 billion. The company’s bottom line has struggled to beat estimates lately, missing estimates the last four quarters for an average earnings surprise of -7.09%.

On top of that, our most recent estimate is 1.91% lower than the consensus estimate. An earnings miss in Q3 would mark the 6th consecutive quarterly miss for DE. Looking ahead to the company’s full year, earnings are forecasted to increase 8.84% to $10.22 per share on the back of a 4.6% total revenue jump to $34.88 billion.

DE has been susceptible to the ongoing trade war between Beijing and Washington. Dimmed economic outlooks resulting from the trade war have resulted in uncertainties about the company’s agricultural segment. However, the Trump administration’s $16 billion aid program for farmers hurt by the trade war, unveiled late last month, might bode well for DE. Still, Q3 estimate revisions have trended unfavorably for the company recently.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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