Update: Deere & Company Earnings

Aug.13.14 | About: Deere & (DE)

Summary

Q3 2014 EPS reported of $2.33 per share was down 9% Y/Y.

Q3 revenue reported was $9.5 billion, down 5% Y/Y.

The Q3 report has confirmed my earlier opinion of the stock.

Deere & Company (NYSE:DE) reported earnings today that beat analyst EPS and revenue estimates. EPS came in at $2.33, which was 13 cents above analyst estimates. Revenue came in at $9.5 billion, which was $750 million above estimates. Despite the beat, the stock is down today as investors focus on the next couple of quarters.

Notable items from Deere's press release include:

  • The agricultural economy remains in a relatively healthy state, but falling commodity prices are contributing to a reduction in farm income. Thus, there is pressure on the equipment market, particularly large models.
  • Deere's worldwide sales of agriculture and turf equipment are forecast to decrease by about 10 percent for fiscal year 2014.
  • Deere's worldwide sales of construction and forestry equipment are forecast to increase by about 10 percent for full-year 2014.

In my previous article about Deere, I posited that the company is a buy, based on strong financials and long-term growth prospects. Those facets are still in place, and I continue to consider Deere a buy. It is not surprising that the market is focused on the short-term decline in revenues and earnings, but the long-term investor should do very well with the stock. DE remains a bargain at about 11x forward P/E.

In addition, there is somewhat of a silver lining in Deere's Q3 earnings report. That is the fact that EPS held up fairly well despite the revenue drop. Although margins weakened (as to be expected), this is still a company that earned $850 million on $9.5 billion in revenue. Not all companies handle down times that well, and it is another indication that the management at Deere is solid.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.