Deere (DE) To Report Q2 Earnings: Is A Surprise In Store?

Deere & Company (NYSE:DE) is set to release second-quarter fiscal 2017 results on May 19, before the opening bell.

In the last reported quarter, the company reported a positive earnings surprise of 22.00%. It is worth noting that Deere has outperformed the Zacks Consensus Estimate in all the trailing four quarters, the average positive surprise being 60.50%.

Let’s see how things are shaping up at the company prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Deere is likely to beat on earnings because it has the right combination of two key ingredients.

Zacks ESP: Deere has an Earnings ESP of +4.27%. This is because the Most Accurate estimate is pegged at $1.71, higher than the Zacks Consensus Estimate of $1.64. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Deere carries a Zacks Rank #2 (Buy). It should be noted that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates.

Deere’s combination of a Zacks Rank #2 and +4.27% ESP makes us reasonably certain of an earnings beat.

However, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

What’s Driving the Better-Than-Expected Earnings?

Deere projects total equipment sales to rise about 1% in second-quarter fiscal 2017 compared with the year-ago period. Foreign currency rates are not likely to have a material translation effect on equipment sales for the second-quarter fiscal 2017. Deere will gain from durable business model and a wider range of revenue sources.

Though geopolitical risks, currency volatility and low crop prices will adversely affect Deere’s results, its execution of operating plans, disciplined cost management and a broad product portfolio remain tailwinds.

Share Price Performance

Deere outperformed the Zacks categorized Machinery-Farm industry over the past one year. The company’s shares gained around 35.3% compared with 32.5% growth recorded by the industry.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Altra Industrial Motion Corp. (NASDAQ:AIMC) has an Earnings ESP of +1.96% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Angie's List, Inc. (NASDAQ:ANGI) has an Earnings ESP of +37.50% and a Zacks Rank #1.

Bryn Mawr Bank Corporation (NASDAQ:BMTC) has an Earnings ESP of +1.75% and a Zacks Rank #1.

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