Deere posts 22% earnings increase, lowers FY22 projections

John Deere

Deere & Co. reported nearly $1.9 billion in net income in the third quarter – a 22% increase year-over-year. But the Moline-based company’s stock fell in early trading Friday, Aug. 19, after its Q3 performance failed to meet Wall Street estimates.

In an earnings report released before the market’s opening bell, the global agriculture, forestry and turf equipment manufacturer also trimmed its full-year profit forecast citing higher costs and ongoing supply chain pressures. 

Deere stock stood at $365.62 per share, down $2.38 as of late morning.

John May

“We’re proud of the extraordinary efforts by our employees to increase factory output and get products to customers under challenging circumstances,” Chairman and CEO John C. May said in the company’s news release. “At the same time, our results reflected higher costs and production inefficiencies driven by the difficult supply-chain situation.” 

Deere said quarterly net income increased to nearly $1.88 billion, or $6.16 per share, compared to $1.7 billion, or $5.32 per share, reported for the quarter ended Aug. 21, 2021. 

But the Zacks Consensus Estimate for Deere’s 3Q earnings was $6.62 per share, which anticipated a growth of 24.3% year over year. Zacks tracks the estimates of a dozen individual sell-side analysts to create its consensus estimate.

For the first nine months of the year, Deere’s said in the same earnings report, net income was $4.885 billion, or $15.88 per share, compared with $4.68 billion, or $14.86 per share, for the same period last year. Net sales and revenues increased 22% to $14.102 billion, for the third quarter of 2022, and rose 13% to $37.041 billion, for the first nine months. Net sales were $13 billion for the quarter and $33.565 billion for nine months, compared with $10.413 billion and $29.461 billion, respectively, last year. 

Deere now is forecasting net income for fiscal year 2022 to range from $7 billion to $7.2 billion. That’s down from the company’s previous earnings estimate of $7 billion to $7.4 billion. 

“Looking ahead, we believe favorable conditions will continue into 2023 based on the strong response we have experienced to early-order programs,” Mr. May said. “We are working closely with our factories and suppliers to meet higher levels of customer demand next year. Additionally, we are confident the company’s smart industrial strategy and leap ambitions will continue unlocking new value for customers through Deere’s advanced technologies and solutions.”

Deere posted increased net sales across nearly all its divisions. Production & Precision Agriculture increased 43% to $6.1 million from $4.25 million vs. the same quarter last year.  Small Agriculture & Turf was up 16% to $ 3.6 million from $3.1 million a year ago. Construction & Forestry’s net sales were $3.27 million – up 8% from $3 million.

Among the challenges facing the company in the next quarter are ongoing “global macroeconomic conditions. They include inflation, rising costs of materials, slower growth, higher interest rates, currency fluctuations that can impact the value of U.S. dollars and consumer confidence and access to products.

Climate change patterns; political and social stability and military conflicts such as the Russian invasion of Ukraine; natural disasters; the sustainability of economic recovery from COVID-19; and significant continued volatility could continue for a prolonged period.

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