UPDATE: Deere & Co. (DE) Tops Q2 EPS by 17c; Affirms Outlook
Deere & Co. (NYSE: DE) reported Q2 EPS of $2.65, $0.17 better than the analyst estimate of $2.48. Revenue for the quarter came in at $9.95 billion versus the consensus estimate of $9.65 billion.
"John Deere is on its way to another year of solid financial and operating performance," said Samuel R. Allen, chairman and chief executive officer. "Our second-quarter earnings showed further proof of the adept execution of our operating plans. We kept costs and assets well under control while successfully managing major new-product transitions associated with more stringent emissions standards. In addition, our construction and forestry and financial services operations delivered improved results, reflecting the power of our broad-based business lineup."
Agriculture & Turf. Sales fell 12 percent for the quarter and 7 percent for six months due largely to lower shipment volumes, the previously announced sale of John Deere Landscapes and the unfavorable effects of currency translation, partially offset by price realization.
Construction & Forestry. Construction and forestry sales increased 2 percent for the quarter and 3 percent for six months mainly as a result of higher shipment volumes. Operating profit was $132 million for the quarter and $226 million for six months, compared with $81 million and $153 million last year. Operating profit improved for both periods primarily due to higher shipment volumes, lower production costs and lower selling, administrative and general expenses, partially offset by higher sales incentive costs. Six-month results also benefited from lower research and development expenses.
Market Conditions & Outlook
Agriculture & Turf. Deere's worldwide sales of agriculture and turf equipment are forecast to decrease by about 7 percent for fiscal-year 2014, including a negative currency-translation effect of about 1 percent.
Although the agricultural economy remains in a relatively healthy condition, farm income is forecast to be lower than last year. The decline is putting pressure on demand for farm equipment, especially for larger models. At the same time, strength in the U.S. livestock sector is providing support to sales of mid- and smaller-size tractors. Based on these factors, industry sales for agricultural machinery in the U.S. and Canada are forecast to be down 5 to 10 percent for the year.
Full-year industry sales in the EU28 are forecast to be down about 5 percent due to lower crop prices and farm incomes. In South America, industry sales of tractors and combines are projected to be down about 10 percent from strong 2013 levels. Market conditions in the Commonwealth of Independent States have weakened and industry sales there are expected to be down significantly for the year. Asian sales are projected to be up slightly.
In the U.S. and Canada, industry sales of turf and utility equipment are expected to be flat to up 5 percent for 2014, helped by improved market conditions.
Construction & Forestry. Deere's worldwide sales of construction and forestry equipment are forecast to increase by about 10 percent for full-year 2014. The gain reflects further economic recovery and higher housing starts in the U.S. as well as sales increases outside the U.S. and Canada. Global forestry sales are expected to be up for the year due to general economic growth and improved sales in European markets.
Company Outlook & Summary
Company equipment sales are projected to decrease about 4 percent for fiscal 2014 and for the third quarter compared with the year-ago periods. Included is an unfavorable currency-translation effect of about 1 percent for the year. For the fiscal year, net income attributable to Deere & Company is anticipated to be about $3.3 billion.
For earnings history and earnings-related data on Deere & Co. (DE) click here.