Deere (DE +11.3%) powers to all-time highs following its easy FQ4 earnings and revenue beats, as factors ranging from machinery pricing to lower overheads spending helped it report a much smaller-than-expected decline in quarterly earnings, CFO Raj Kalathur said during today's earnings conference call.
DE forecasts FY 2017 sales of its farm and construction equipment will fall by 1% Y/Y, but analysts were expecting sales to drop by ~3% after sliding 9.3% to $23.4B in 2016, and predicts next year's profit will slip by just 1% following a 21% decline in 2016 to $1.5B.
DE also said prices for new and used equipment firmed in the quarter, taking pressure off dealers to offer discounts that squeeze margins.
Caterpillar (CAT +2.7%), which has some market overlap with DE, surges to its best levels since December 2014, while AGCO (AGCO +3.4%), Lindsay, CNH Industrial (CNHI +4.7%) and Tractor Supply (TSCO +0.8%) also are higher.
Tractor Supply (NASDAQ:TSCO) -9.4% AH after guiding Q3 below consensus and lowering FY 2016 guidance, citing economic headwinds impacting consumer spending throughout many of its markets, particularly the energy producing and agricultural markets.
TSCO now expects Q3 EPS of $0.65-$0.67 vs. $0.72 analyst consensus, on net sales forecast to increase 4.2%-5% to $1.54B-$1.55B vs. $1.61B consensus and $1.48B in the year-ago quarter; comparable store sales are seen flat to a 1% decline vs. a 2.9% increase in last year's Q3.
TSCO also cuts FY 2016 guidance, expecting EPS of $3.22-$3.26 vs. $3.38 analyst consensus and prior guidance of $3.35-$3.40, while revenues are forecast at $6.7B-$6.75B vs. $6.84B consensus and prior outlook of $6.8B-$6.9B.
1) Q2 weakness appears to be mostly weather-induced; 2) Sales trends have rebounded since Memorial Day; 3) A just-rolled out inventory system should start paying dividends; 4) The stock appears set to open at a healthy discount to its historic 25x P/E multiple.
"We can see nothing with Q2 that represents a structural change to the story, and all of the favorable long-term drivers (limited e-com threat, favorable demographics, fragmented competition, etc.) remain intact."