Deere (DE) To Report Q1 Earnings: What's In The Offing?

Deere & Company (NYSE:DE) is set to report first-quarter fiscal 2018 results on Feb 15, before the market opens.

Last quarter, Deere delivered a positive earnings surprise of 7.5%. The company’s surprise history has been impressive. It beat estimates in each of the trailing four quarters, with an average positive earnings surprise of 19.52%. Over the last 30 days, the Zacks Consensus Estimate for the fiscal first-quarter’s earnings remained unchanged at $1.13.

Let’s see how things are shaping up for this announcement.

Key Factors to Consider

Deere projects total equipment sales to increase about 38% year over year in the fiscal first quarter. The forecast includes a positive foreign-currency translation impact of about 3%. The Zacks Consensus Estimate for the first-quarter fiscal sales is pegged at $6.4 billion, reflecting year-over-year growth of 36%. The outlook reflects Deere’s solid order book based on industry activities and positive trend in retail sales.

In addition, the Wirtgen acquisition is anticipated to drive Deere’s results as well. In December 2017, Deere acquired this road-construction equipment maker for $4.6 billion. The buyout will help expand its North America-centric construction business globally and catapult it to the position of an industry leader in the road construction space. Moreover, Wirtgen is expected to add about 6% to Deere's sales for the fiscal first quarter.

Our Consensus Estimates indicate that net sales of Deere’s Agriculture and Turf equipment segment will reach $4.41 billion in the fiscal first quarter, rising around 22.5% year over year. The Zacks Consensus Estimate for Construction & Forestry equipment sales is pegged at $1.78 billion for the to-be-reported quarter, reflecting year-over-year growth of 31.8%. The estimate for the Financial Services segment’s sales is $800 million, reflecting year-over-year growth of 15%.

Notably, the Zacks Consensus Estimate for earnings per share is pegged at $1.13 for the fiscal first quarter, reflecting remarkable year-over-year growth of 85%. Improved operational performance due to disciplined cost management, and continued investment in innovative technology and solutions will drive the company’s performance.

Earnings Whispers

Our proven model shows that Deere is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen.

Zacks ESP: The Earnings ESP for Deere is +4.89%. This is because the Most Accurate estimate of $1.18 comes in higher than the Zacks Consensus Estimate of $1.13. A favorable Earnings ESP serves as a meaningful and leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Deere currently carries a Zacks Rank #2. It should be noted that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings.

Conversely, stocks with a Zacks Rank #4 or 5 (Sell rated) should never be considered going into an earnings announcement.

The combination of Deere’s Zacks Rank #2 and Earnings ESP of +4.89% makes us confident of a likely earnings beat.

Share Price Performance

The company’s price performance has been impressive over the past year. Its shares have rallied 43.7% in a year’s time, outperforming the industry’s gain of 33.1%.

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) , with an Earnings ESP of +1.03% and a Zacks Rank #3. Its shares have gained 3.1%, over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.

Brady Corporation (NYSE:BRC) , with an Earnings ESP of +0.57% and a Zacks Rank #3. The stock has appreciated 11.5% in six months’ time.

Hyster-Yale Materials Handling, Inc. (NYSE:HY) , with an Earnings ESP of +5.70% and a Zacks Rank #3. The company’s shares have been up 14.1% during the same time frame.

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