John Deere tractors are displayed at Belkorp Ag in Santa Rosa, California.
Justin Sullivan/Getty Images
Deere
‘s fiscal first-quarter earnings, reported Friday, look just good enough to push shares higher in premarket trading. The agricultural equipment giant reported numbers that beat Wall Street estimates, and guidance for the coming year was raised.
Deere (ticker: DE) stock was up about 2% in premarket trading. S&P 500 and Dow Jones Industrial Average futures rose about 0.5% and 0.4%, respectively.
Deere reported earnings per share of $2.92 from $8.5 billion in equipment sales. Wall Street was looking for earnings of $2.26 a share from $8.3 billion in equipment sales.
Sales of equipment rose about 6% from the fiscal first quarter of 2021, but operating profit dropped 32% to $939 million, compared with $1.38 billion in the year-ago quarter. The earnings beat was driven by higher-than-expected sales, said Baird analyst Mig Dobre in a report Friday reacting to earnings.
In the large agricultural equipment division, higher production costs of about $407 million were only partially offset by $244 million in higher realized pricing. That was the same price-cost pattern in Deere’s small agricultural equipment division. Price gains exceeded cost increased in construction equipment.
“Deere’s performance in the first quarter was impressive given production issues surrounding the delayed ratification of our UAW contract in late November as well as persistent challenges posed by the supply chain and pandemic,” said CEO John May in the company’s news release. “These factors led to higher production costs in the quarter. We continue to work closely with key suppliers to manage the situation, enabling our customers to deliver food production and critical infrastructure.”
Looking ahead, Deere expects to earn $6.7 billion to $7.1 billion in full-year net income. Back in November, Deere gave initial forecasts for the 2022 fiscal year, saying it expected $6.5 billion to $7 billion in net income.
It looks like a solid earnings report. The stock might not be up more because expectations were rising. Deere peer AGCO (AGCO) blew away fourth-quarter earnings expectations recently and shares rose 9% following its earnings report. Deere stock rose almost 5% on the same day. What’s more, Deere stock has risen about 11% year to date, far better than the 8% comparable loss of the S&P 500.
Investors might see some stock volatility in regular hours trading Friday. Options markets implied the stock would move about 4.5%, up or down, following the earnings report.
Management hosts a conference call at 10 a.m. Eastern time to discuss results. Analysts and investors will be eager to hear about farm fundamentals for the coming year.
Write to Al Root at [email protected]
