Deere (DE) To Report Q4 Earnings: What's In The Offing?

Deere & Company (NYSE:DE) is scheduled to report fourth-quarter fiscal 2017 results before the market opens on Nov 22.

In the last quarter, the company posted earnings of $1.97 per share, beating the Zacks Consensus Estimate by more than 2%. The company’s earnings have surpassed estimates in each of the trailing four quarters, recording a remarkable average positive earnings surprise of 55.1%.

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

Key Factors to Consider

Deere expects its total equipment sales to be up about 10% year over year in fiscal 2017. The company projects the figure to be up 24% for the fiscal fourth quarter compared with year-ago period. This forecast includes a positive foreign-currency translation impact of nearly 1% for fiscal 2017 and 2% for the fiscal fourth quarter. According to our latest consensus estimates, Deere is projected to post net sales from equipment operations of $6.91 billion in the fourth quarter, reflecting year-over-year growth of 22.3%.

Deere expects its total equipment sales to be up about 10% year over year in fiscal 2017. The company projects the figure to be up 24% for the fiscal fourth quarter compared with year-ago period. This forecast includes a positive foreign-currency translation impact of nearly 1% for fiscal 2017 and 2% for the fiscal fourth quarter. According to our latest consensus estimates, Deere is projected to post net sales from equipment operations of $6.91 billion in the fourth quarter, reflecting year-over-year growth of 22.3%. The Zacks Consensus Estimate for earnings for the quarter is pegged at $1.42 for the fiscal fourth quarter.

For fiscal 2017, Deere anticipates net sales to increase about 11% year over year and projects net income to be roughly $2.08 billion. The Zacks Consensus Estimate for net sales is pegged at $25.7 billion and for EPS is pegged at $6.47 for fiscal 2017.

Segment wise, Deere estimates Agriculture and Turf equipment sales to rise nearly 9% in fiscal 2017, including a positive currency-translation effect of about 1%. The year-over-year increase is backed by growth in overseas markets and lower field inventories. The company also predicts global sales for Construction & Forestry equipment to be up about 15%, with no material currency-translation impact. Notably, the forecast reflects moderate economic growth worldwide.

Our consensus estimates indicate that net sales of Deere’s Agriculture and Turf equipment segment will reach $5.39 billion in the fiscal fourth quarter. The Zacks Consensus Estimate for Construction & Forestry equipment sales is pegged at $1.57 billion for the to-be-reported quarter.

Also, Deere expects industry sales of tractors and combines to jump 20% in South America, on the back of improving economic and political conditions in Brazil and Argentina. Going forward, the company forecasts that grain exports will touch record levels in both Russia and Ukraine. Furthermore, agricultural economies in Latin America continue to improve with record corn and soybean production, and upbeat exports forecast for the season.

Deere expects its industry sales for agricultural equipment in the United States and Canada to be down roughly 5% in fiscal 2017 due to weakness in livestock sector and the lingering impact of low crop prices. In the EU28 region, sales will likely be flat to down 5% due to dismal commodity prices and farm income.

In addition to the above, the company’s price performance has been impressive over the past year. Its shares have rallied 46.4% in a year’s time, outperforming the 38.9% rally of the industry it belongs to.

Earnings Whispers

Our proven model does not conclusively show that Deere is likely to beat on earnings this quarter as it does not possess the key components. 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. This is not the case here as you will see below:

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate of $1.39 and the Zacks Consensus Estimate of $1.42, is -2.53%. 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. While this increases the predictive power of ESP, we also need to have a positive ESP to be confident about an earnings surprise.

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

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:

Alamo Group Inc. (NYSE:ALG) , with an Earnings ESP of +6.45% and a Zacks Rank #1. Its shares have gained 47.4%, year to date. You can see the complete list of today’s Zacks #1 Rank stocks here.

Advanced Accelerator Applications S.A. (NASDAQ:AAAP) , with an Earnings ESP of +29.09% and a Zacks Rank #1. Year to date, its shares have soared a whopping 203.6%.

Axcelis Technologies, Inc. (NASDAQ:ACLS) , with an Earnings ESP of +9.35% and a Zacks Rank #1. Its shares have rallied 138.2% during the same time frame.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>