Despite ongoing supply chain issues and inflation pressures, continued strong demand for its products drove up Deere & Co.’s second-quarter earnings by 17% to a net income of $2.098 billion, or $6.81 per share.
That’s up from net income of $1.790 billion, or $5.68 per share, for the quarter ended May 2, 2021, according to the Moline-based company’s earnings report released Friday, May 20.
The $6.81 per share for the quarter ending May 1, 2022, beat Wall Street analysts estimates by 12 cents per share. According to MarketWatch, “The FactSet consensus for earnings per share was $6.69.”
John C. May, chairman and CEO for John Deere, said in the earnings release, “Deere’s second-quarter performance reflected a continuation of strong demand even as we face supply-chain pressures affecting production levels and delivery schedules. We are proud of their extraordinary efforts to get products to our customers as soon as possible under the challenging circumstances.”
Deere’s net income for the first six months of the year totaled $3.001 billion, or $9.72 per share. That compared with $3.013 billion, or $9.55 per share, for the same six-month period last year.
Despite that, Deere stock dropped by 8.1% in early trading and stood at $321.20 at 10:30 a.m. today. That’s down from a March record high of $446.76.
Al Root, Barron’s senior reporter, speculated on Friday, “The stock is down perhaps because investors always expect good news from Deere. The quarterly results have now beaten Wall Street’s bottom-line estimates for 11 consecutive quarters now. That goes back to the middle of 2019, before the pandemic. That isn’t bad for a company that is more affected by commodity prices than most.”
For example, Deere also reported Friday that net sales and revenues for the second quarter increased 11%, to $13.370 billion, and rose 8%, to $22.939 billion year to date. That period included a first quarter marked by a five-week United Auto Workers strike, a global pandemic and supply chain issues.
In addition, net sales were $12.034 billion for the quarter and $20.565 billion year to date, compared with $10.998 billion and $19.049 billion in the same period last year.
The company’s strong performance also pushed Deere’s full-year earnings estimates up to the range of $7 billion to $7.4 billion. That tops Deere’s earlier estimate of $6.7 billion to $7.1 billion.
And those gains are expected to come even as Deere reports that it will continue to face other challenges including higher production and supply chain costs and losses created as a result of the Russo-Ukrainian War. As of May 1, the company reported Friday, Deere’s net exposure in Ukraine and Russia was $454 million.
“Looking ahead, we believe demand for farm equipment will continue benefiting from positive fundamentals in spite of availability concerns and inflationary pressures affecting our customers’ input costs,” Mr. May said. “The company’s smart industrial strategy and recently announced Leap Ambitions are focused on helping customers manage higher costs and increasingly scarce inputs, while improving their yields, through the use of our integrated technologies.”
Mr. May also promised shareholders in late February that the company would be amping up its focus on vehicle autonomy, electrification, connectivity and sustainability and he touted Deere’s Feb. 7 acquisition of green energy provider Kreisel Electric, a pioneer in the development of immersion-cooled battery technology.