Deere & Co. (DE, Financial) released its first-quarter results for fiscal 2021 before the opening bell on Feb. 19. The company registered stronger-than-expected earnings and revenue for the quarter. Deere credited its cost-cutting efforts and stabilizing farm sales for beating top and bottom line expectations.
The Moline, Illinois-based company recorded adjusted earnings per share of $3.87 in the first quarter, which was up from $1.63 reported last year. Analysts had expected EPS of $2.14. Revenue of $9.11 billion surged 19% year-over-year and surpassed expectations of $7.225 billion.
The company's shares surged 0.9% in premarket trading to $303 per share following the earnings announcement.
Segment performance
The small agriculture and turf division recorded a 27% increase in sales to $2.52 billion. The increase was due to higher shipment volume, price realization and favorable impacts from currency translations. Operating profit rose a mammoth 203% to $469 million thanks to price realization and lower research and development costs and general expenses. This was only partly negated by "voluntary" employee separation expenses and impairments and closure expenses.
In the construction and forestry segment, sales surged 21% to $2.47 billion on the back of higher shipment volume and favorable foreign currency exchange impacts. The operating profit was up 188% to $268 million due to price realization, which was partially negated by impairment charges associated with enduring assets and mounting production expenses.
The financial services business' net income was $204 million, reflecting 49% growth from the prior-year quarter.
The company reported that its commodity prices have dipped following the spread of Covid-19. This has adversely impacted farmers, who were already reeling under the pressure of the U.S.-China trade war. However, farmer sentiment has recovered somewhat thanks to improvement in planting conditions and government support through subsidy payments.
Looking ahead
The farm equipment maker predicts full fiscal 2021 net income to be in the $4.6 billion to $5 billion range. That compares favorably with its previous forecast of $3.6 billion to $4 billion. According to Chairman and CEO John C. May, improvement in the farm economy and stability in the construction and forestry market should support Deere's growth this year:
"John Deere started 2021 on a strongly positive note... Our results were aided by outstanding performance across our business lineup and improving conditions in the farm and construction sectors. In addition, our smart industrial operating strategy is making a significant impact on the company's results while it also helps our customers be more profitable and sustainable."
For fiscal 2021, sales are expected to be $25.4 billion for the agriculture and turf equipment division (both small and big ag and turf) and between $10.5 billion and $11 billion for the construction and forestry equipment division.
Disclosure: I do not hold any positions in the stocks mentioned.
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