Earnings Release
A month back, Deere & Company (DE) reported results for the first quarter of fiscal 2010. Earnings were $243.2 million or 57 cents per share, up from $203.9 million or 48 cents in the year-ago period. Reported EPS was much above the Zacks Consensus Estimate of just 19 cents.
With respect to earnings surprises, Deere’s track record in the preceding four quarters has been positive. It produced an average positive earnings surprise of 158.88% over the last four quarters, meaning that it has beaten the Zacks Consensus Estimate by that measure over the trailing 12 months.
Surprise – Reported Earnings History
The improvement in net earnings was mainly led by the increase in Agriculture and Turf’s operating profit, which rose 21.8% year over year. Agriculture and Turf contributed 75% of total revenue in the quarter. The increase in profit primarily resulted from lower raw-material costs, improved price realization and increase in demand for tractors, combines, sprayers and forage equipment in comparison to the 2008 quarter.
Deere expects the present condition to continue in the near term and thus, anticipates 2010 net income of $1.3 billion, up from $873.5 million in 2009.
(Read our full coverage on this earnings report: Deere Beats Zacks Estimates)
Estimate Revision Trend
Based on the above, 22 out of 23 analysts covering the stock moved their 2010 EPS estimates upward in the last 30 days. None of them moved in the opposite direction. For 2011, 19 out of 21 analysts raised their estimates and none downgraded.
Agreement – Estimate Revisions
Magnitude of Estimate Revision
On a consensus basis, estimate went up from $2.52 a month-ago to $3.18 currently for 2010 and from $3.58 to $4.09 for 2011. Thus, we upgraded our short-term rating on the stock to Strong Buy, which equates to a Zacks #1 Rank.
Magnitude – Consensus Estimate Trend
Long-term Neutral Recommendation
However, our long-term recommendation on the stock remains Neutral based on the fact that a part of the company’s business is exposed to a variety of risks and uncertainties related to natural disasters and the action or inaction of government bodies.
Moreover, Deere’s efforts to grow its business depend to a large extent on access to and success in developing market share and operating profitably in additional geographic markets including Brazil, Russia, India and China (BRAC).
Read the full analyst report on “DE”
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