Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Deere Are Soaring Today

By Lou Whiteman – Feb 21, 2020 at 11:12AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Quarterly results came in much better than expected.

What happened

Shares of Deere & Co. (DE -3.44%) traded up more than 9% on Friday after the agriculture and heavy equipment manufacturer reported better-than-expected earnings. Deere says the farm sector is stabilizing, which should help stabilize sales of the company's tractors, loaders, and other farm equipment.

So what

Deere reported fiscal first-quarter earnings of $1.63 per share on revenue of $7.63 billion, easily topping analyst expectations for $1.26 per share in earnings on $6.42 billion of sales. The company generated net income of $517 million in the quarter, compared to $498 million in the same three months a year prior, despite revenue falling 4% year over year.

A farm tractor spraying crops in the field.

Image source: Getty Images.

CEO John C. May said in a statement that the results "reflected early signs of stabilization in the U.S. farm sector," which helped to offset slower sales in the construction sector and in forestry. The results were also aided by Deere's voluntary employee reduction program, which helped drive down costs and improve flexibility.

"Farmer confidence, though still subdued, has improved due in part to hopes for a relaxation of trade tensions and higher agricultural exports," May said.

Now what

Deere said it expects to generate net income of between $2.7 billion and $3.1 billion in fiscal 2020, with construction and forestry revenue expected to decline 10% to 15% and agriculture equipment sales expected to decline 5% to 10%, including the impact of currency translation. In North America, agriculture equipment sales are expected to be flat to down 5%, driven by lower demand from Canada.

The company has faced headwinds including U.S./Chinese trade tensions and the threat of a recession, which cut into equipment demand from China and created uncertainty among U.S. farmers, and now must deal with the impact of the coronavirus. But Deere's results show that management is dealing with these challenges well, and the markets are responding accordingly on Friday.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Deere & Company Stock Quote
Deere & Company
$334.22 (-3.44%) $-11.91

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.