Deere Punished for EPS Miss, Soft Outlook (DE)

Deere & Co. (NYSE: DE) reported fiscal third-quarter earnings per share (EPS) of $1.98 and $9.59 billion in revenues before markets opened this morning. In the same period a year ago, the tractor and heavy equipment maker reported EPS of $1.69 on revenue of $8.37 billion. Results also compare to the Thomson Reuters consensus estimates for EPS of $2.31 and $9.53 billion in revenue.

The company’s chairman and CEO said:

John Deere delivered record third quarter performance in both sales and income. Although a strong quarter, we are not satisfied that sales fell short of our expectations due to weakening in certain international markets and short-term manufacturing inefficiencies resulting from the introduction of a record number of new products.

Deere was hit hard on sales and profits by currency exchange rates. In its worldwide equipment operations division, for example:

Equipment net sales in the United States and Canada increased 28 percent for the quarter and 18 percent year to date. Outside the U.S. and Canada, net sales were essentially unchanged for the quarter and increased 7 percent for nine months, with unfavorable currency-translation effects of 11 percent and 6 percent for these periods.

Like every other U.S. multinational, the stronger dollar had a negative impact on earnings in the June quarter. And the exchange rates also affected the company’s outlook. Deere expects sales growth for its fourth quarter and the full year of 13%, which includes a 4% hit from currency exchanges. Full-year income is expected to total $3.1 billion, which translates to about $723 in net income for the fourth quarter. Net income for the third quarter was $788 million.

The miss on EPS and the light forecast are hurting the stock this morning. Shares are down about 5.5% in premarket trading at $75.94. The current 52-week range is $59.92 to $89.70. Thomson Reuters had a consensus analyst price target of $88.44 before today’s results were announced.

Paul Ausick