Deere & Co. (DE) Tops Q1 EPS Views; Trims Outlook

(Updated - February 19, 2016 6:49 AM EST)

Deere & Co. (NYSE: DE) reported Q1 EPS of $0.80, versus the analyst estimate of $0.71. Revenue for the quarter came in at $5.53 billion versus the consensus estimate of $4.94 billion.

Market Conditions & Outlook

Agriculture & Turf. Deere's worldwide sales of agriculture and turf equipment are forecast to decrease by about 10 percent for fiscal-year 2016, including a negative currency-translation effect of about 4 percent. Industry sales for agricultural equipment in the U.S. and Canada are forecast to be down 15 to 20 percent for 2016. The decline, reflecting the impact of low commodity prices and stagnant farm incomes, is expected to be most pronounced in the sale of higher-horsepower models.

Full-year 2016 industry sales in the EU28 are forecast to be flat to down 5 percent, with the decline attributable to low commodity prices and farm incomes, including further pressure on the dairy sector. In South America, industry sales of tractors and combines are projected to be down 10 to 15 percent mainly as a result of economic concerns and uncertainty about government-sponsored financing in Brazil. Asian sales are projected to be flat to down slightly, due in part to weakness in China.

Industry sales of turf and utility equipment in the U.S. and Canada are expected to be flat to up 5 percent for 2016, benefiting from new products and general economic growth.

Construction & Forestry. Deere's worldwide sales of construction and forestry equipment are forecast to be down about 11 percent for 2016, including a negative currency-translation effect of about 2 percent. The forecast decline in sales reflects the impact of weak conditions in the North American energy sector as well as lower sales outside the U.S. and Canada. In forestry, global sales are expected to be down 5 to 10 percent from last year's strong levels, primarily as a result of weaker demand in the U.S. and Canada.

Financial Services. Fiscal-year 2016 net income attributable to Deere & Company for the financial services operations is expected to be approximately $525 million. The outlook reflects less favorable financing spreads, an increased provision for credit losses and the unfavorable effects of foreign-currency exchange translation. Additionally, 2015 results benefited from a gain on the sale of the crop insurance business.

Guidance:

Net sales of the worldwide equipment operations declined 15 percent for the quarter. Sales included price realization of 2 percent and an unfavorable currency-translation effect of 4 percent. Equipment net sales in the United States and Canada decreased 18 percent. Outside the U.S. and Canada, net sales were down 9 percent, with unfavorable currency-translation effects of 11 percent.

For earnings history and earnings-related data on Deere & Co. (DE) click here.

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