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How Deere Plans to Keep Growing

On Wednesday, Deere (NYSE: DE  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Deere has benefited greatly from the strong agricultural industry in recent years. With the spring planting pointing toward a strong season as farmers try to rebound from a drought-stricken 2012, the company hopes to sell farmers the equipment they need to maximize their crop yields. Let's take an early look at what's been happening with Deere over the past quarter and what we're likely to see in its quarterly report.

Stats on Deere

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$9.81 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

How will Deere's earnings garden grow this quarter?
Analysts have had mixed views on Deere's earnings recently, cutting their April-quarter estimates by $0.02 per share but boosting their full-year fiscal 2013 projections by almost $0.25 per share. The stock has barely budged, rising less than 1% since early February.

Deere has faced some of the same headwinds that have held back more industrially focused companies. With the recent slowdown in Chinese growth weighing on economic activity worldwide, construction-equipment maker Caterpillar (NYSE: CAT  ) recently announced plans to cut jobs in order to keep its costs down. Along with Caterpillar, Joy Global (NYSE: JOY  ) has made its own restructuring, and the plunge in gold prices recently bodes ill for the mining-equipment business that Joy and Caterpillar rely on for much of their sales.

Still, Deere looks poised to benefit from much better weather conditions so far this year than the drought last year that crushed crop production. Although a USDA report last Friday noted that very recent wet and cold weather in the Midwest might temper earlier projections, it still forecast that global harvests of soybeans will rise to an all-time high and push world crop inventories to new records as well, while corn inventories are seen rising to decade-highs.

Deere faces new competition from Japanese rival Kubota (NASDAQOTH: KUBTY  ) , which has benefited greatly from the plunge in the value of the Japanese yen recently. Although Deere remains a much larger company, Kubota will be able to export its farm machinery more cheaply while still maintaining higher profit margins because of the strong U.S. dollar.

In Deere's quarterly report, watch for signs about whether the company plans to make any further cost-cutting efforts of its own. With Deere having benefited for such a long time from fast growth in the agricultural sector, it needs to make plans for a time in the future when the sun stops shining so brightly on its business.

Deere has a strong presence in the ag market, while Caterpillar maintains its market-share leadership with its broader range of machinery that gives it solid competitive advantages. Read all about Caterpillar's strengths and weaknesses in The Motley Fool's brand-new report. Just click here to access it now.

Click here to add Deere to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

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Related Tickers

9/29/2016 11:39 AM
DE $84.74 Up +0.65 +0.77%
John Deere CAPS Rating: ***
CAT $88.53 Up +1.94 +2.24%
Caterpillar CAPS Rating: ***
JOY $27.75 Down -0.01 -0.04%
Joy Global CAPS Rating: ***
KUBTY $77.21 Up +1.13 +1.49%
Kubota Corp (ADR) CAPS Rating: ***