Banking

Farm-Equipment Giant Rises As Earnings Double

Deere & Co. (DE), an agricultural bellwether, beat fiscal third-quarter earnings estimates and guided higher. DE stock rose slightly.




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Deere Earnings

Estimates: Analysts on Wall Street expected Deere earnings to rebound 78% to $4.58, according to FactSet. Revenue was seen growing 26% to $11.267 billion, as the farm, lawn and construction equipment maker laps the pandemic hit a year ago.

Results: Deere earnings more than doubled to $5.32 as revenue swelled 29% to $11.53 billion. All categories, including agriculture and turf and construction, drove results despite a challenging supply chain, Deere said. In Q3, ag sales rose 29%, turf sales grew 32%, and construction and forestry sales increased 38%.

The maker of increasingly tech-laden tractors, combines and construction equipment warned on chip supply constraints in May.

Outlook: Deere now projects full-year income of $5.7 billion-$5.9 billion, up from $5.3 billion-$5.7 billion in May. Analysts are expecting 2021 EPS of $18.13, FactSet says.

“Looking ahead, we expect demand for farm and construction equipment to continue benefiting from favorable fundamentals,” CEO John May said.

DE Stock

Shares added 1.5% to 364.30 early on the stock market today. DE stock has fallen for six straight sessions, finding support Thursday at the 50-day line. Deere stock now has a 388.62 cup-with-handle buy point, according to MarketSmith chart analysis. Caterpillar (CAT) was flat in premarket trade Thursday, after undercutting its 50-day and 200-day lines earlier this week.

Deere’s key end markets are set up favorably.

Its construction business could benefit from the planned $1 trillion infrastructure bill. Deere makes machines used in earth moving, road building and timber harvesting.

Its agricultural business is expected to benefit from strong replacement demand given aging fleets. But grain prices have eased after surging to multiyear highs, according to Reuters. Rising raw material costs are another concern.

Meanwhile, China’s growth appears to be slowing, though Deere has less exposure to that country than Caterpillar.

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