Deere Earnings Crush Estimates. The Stock Is Dropping.

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stock was dropping Friday, even though the agricultural equipment maker beat fiscal third-quarter earnings projections and raised its forecast for full-year profits.

Deere (ticker: DE) shares were down 2.1%, in morning trading. The

S&P 500


Dow Jones Industrial Average

were up 0.6% and 0.5%, respectively.

The company reported $5.32 in per-share earnings from $10.4 billion in equipment sales, topping expectations for $4.58 a share and $10.3 billion in sales. Estimates were according to Bloomberg and FactSet.

Net income for fiscal 2021 is now estimated to be roughly $5.8 billion, up from prior guidance of $5.5 billion. The $300 million boost to profit is a little more than the $200-plus million that fiscal third-quarter net income beat projections by.

Baird analyst Mig Dobre called the quarter a solid beat and noted that Deere was buying its joint venture with Hitatchi. This is another example of the company investing in construction markets. Deere bought road paver Wirgen in 2017.

Citigroup analyst Timothy Thein pointed out strong pricing helped profit margins.

Bernstein analyst Chad Dillard also pointed to better-than-expected profit margins in his Friday report on the earnings. There doesn’t seem to be much to complain about.

Dobre rates Deere stock Buy and has a $425 price target. Thein rates shares Hold and has a $415 price target. Dillard rates shares Hold, too; his target price is $366 a share.

The stock might not be up more, however, because there is only one quarter left in fiscal 2021 for Deere, and investors—at this point—are more interested in what will happen in 2022. Still, the company demonstrated progress in improving profit margins.

Agriculture-related sales hit $4.3 billion, up 29% year over year. Operating profit grew 50% year over year.

Construction-related sales hit $3 billion, up 38% year over year. Operating profit in that division grew 126% year over year.

Net income at Deere’s financial service arm hit $227 in the quarter, up 24% year over year.

“Our strong results, driven by essentially all product categories, are a testament to the exceptional efforts of our employees and dealers,” said CEO John May in a statement.

The company will discuss the results on a morning conference call.

Deere stock is up 33% in 2021, and has gained 88% over the past 12 months. The S&P is up about 17% and 30% over comparable spans.

Deere shares are trading at about 17.6 times 12-month earnings estimates. The S&P is trading at about 20.8 times that number.

Write to

Roy Walsh

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