Deere's Revenue, Profit Expected to Rise -- Earnings Preview

By Bob Tita Features Dow Jones Newswires

Deere & Co. is scheduled to release its fiscal fourth-quarter earnings before the market opens Wednesday. Here's what you need to know:

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EARNINGS FORECAST: Wall Street analysts expect earnings per share of $1.47, up from 90 cents a year earlier, according to Thomson Reuters. For the year ended Oct. 31, Deere expects a net profit of $2.1 billion, or about 36% above 2016's profit. For fiscal 2018, analysts anticipate the company earning $7.24 a share, or $2.3 billion in profit.

REVENUE FORECAST: Fourth-quarter equipment sales of $6.98 billion are expected, up from $5.65 billion a year ago. Analysts anticipate Deere ending the year with total sales of $25.7 billion, about 10% above 2016's sales. For 2018, analysts expect sales of farm, construction and forestry machinery to reach $27.7 billion.

WHAT TO WATCH:

BETTER MARKET: Industrywide retail sales of high-horsepower, two-wheel-drive tractors in the U.S. and Canada, as reported by the Association of Equipment Manufacturers, were up 10% during Deere's fiscal fourth quarter, compared with a year earlier. Combines were up 23% during the quarter. AEM's sales figures suggest that Deere's actual fourth-quarter sales will be higher as well, given the company's large share of market in the U.S. Investors will likely be focused on Deere's outlook for 2018. Farmers' incomes have been held down by low prices for crops in recent years, but some appear to be buying equipment again to replenish fleets.

OUT OF SITE: Deere's results in 2017 have been aided by the proceeds from the sale of SiteOne, a landscaping supply distribution business. The sale has added about 75 cents to earnings per share in 2017. Next year though, SiteOne will be a hurdle by making a tougher comparison for Deere's 2018's earnings to top. Without a boost from SiteOne, J.P. Morgan warns that Deere's initial profit forecast for 2018 might be disappointing for investors.

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WHERE'S WIRTGEN: Expect Deere to provide some guidance on the expected closing of its purchase of Germany's Wirtgen Group. The company announced in June it would buy the road-paving equipment maker for about $5 billion. It isn't likely that Deere will include sales and profit from Wirtgen in its 2018 guidance because the deal hasn't closed. Deere said earlier it hoped to complete the purchase by the end of December.

BULL RUN: Deere continues to be a favorite among investors amid signs that the long slump in the North American farm-equipment market may be easing. Deere's stock is up 34% since the start of the year, compared with a 15% gain in the boarder-market Standard & Poor's 500 Index. It is unclear yet whether Deere's major geographic markets, especially the U.S. and Canada, are strong enough yet for a sustained rebound in equipment demand.

Write to Bob Tita at robert.tita@wsj.com

(END) Dow Jones Newswires

November 21, 2017 13:33 ET (18:33 GMT)