Deere & Co. (DE, Financial) released its second-quarter results for fiscal 2021 before the opening bell on May 21. 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 $5.68 in the second quarter, which was up from $2.11 reported last year. Analysts had expected EPS of $4.52. Revenue of $12.06 billion surged 30% year-over-year and surpassed expectations of $10.44 billion.
The company's shares surged 0.8% in premarket trading to $358 per share following the earnings announcement.
Segment performance
The small agriculture and turf division recorded a 30% increase in sales to $3.39 billion. The increase was due to higher shipment volume, price realization and favorable impacts from currency translations. Operating profit rose a mammoth 187% to $648 million thanks to price realization and lower research and development costs and general expenses. This was only partly negated by higher production expenses.
In the construction and forestry segment, sales surged 36% to $3.08 billion on the back of higher shipment volume and favorable foreign currency exchange impacts. The operating profit skyrocketed 409% to $489 million due to price realization, which was partially negated by impairment charges associated with enduring assets and mounting production expenses.
The financial services net income was $222 million, reflecting 270% 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 improvements in planting conditions and government support through subsidy payments.
Looking forward
The farm equipment maker predicts full fiscal 2021 net income to be in the $5.3 billion to $5.7 billion range. That compares favorably with its previous forecast of $4.6 billion to $5 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:
"While the company is clearly performing at a high level, Deere expects to see increased supply-chain pressures through the balance of the year. We are working closely with key suppliers to secure the parts and components that our customers need to deliver essential food production and infrastructure. Despite these challenges, Deere is on track for a strong year and we believe is well-positioned to unlock greater value for our customers and other stakeholders in the future."
For fiscal 2021, sales are expected to be up around 20% to 25% for the small agriculture and turf equipment division and between 25% and 30% for the construction and forestry equipment division.
Disclosure: I do not hold any positions in the stocks mentioned.
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