Tuesday, May 17, 2011

Deere & Co. (NYSE: DE): Q2 Earnings Preview 2011

Deere & Co. (NYSE: DE) is scheduled to release its fiscal second-quarter earnings on Wednesday, May 18, 2011. Analysts, on average, expect the company to report earnings of $2.06 per share on revenue of $8.14 billion. In the year ago quarter, the company reported earnings of $1.58 per share on revenue of $6.55 billion.

Deere & Company provides products and services primarily for agriculture and forestry worldwide. The company operates in three segments: Agriculture and Turf, Construction and Forestry, and Credit.

Deere & Co. is off to a strong start in 2011. Stronger global demand for wheat, corn and beans has made investing in related equipment necessary for farmers. The company has benefited from an atypically strong commodity cycle supported by current low inventory levels of multiple crop types and strong global trends. In February, the company said that it is on track to earn record profits for the full year of 2011.

In the preceding fiscal first-quarter, the Moline, Illinois-based company's net income was $513.7 million, or $1.20 per share, compared to $243.2 million, or 57 cents per share, in the year-earlier quarter. Revenue climbed 27 percent to $6.12 billion from $4.84 billion in the same quarter last year. Analysts, on average, expected the company to report earnings of 99 cents per share on revenue of $5.67 billion.

At its last earnings call in February, Deere lifted its fiscal 2011 outlook. The company said that it now expects net income of about $2.5 billion on 18 percent to 20 percent growth in equipment sales, up from the prior forecast for net income of about $2.1 billion on 10 percent to 12 percent growth in equipment sales. Worldwide sales of agriculture and turf equipment are forecast to increase by about 16 percent for full-year 2011, and worldwide sales of construction and forestry equipment are forecast to rise by about 35 percent for 2011.

The company anticipates equipment sales for the second quarter to increase 25 percent.

The company aims to almost double its net sales by 2018 with expansion of its global footprint amid continuing strong demand for farm machinery and construction equipments. At the company's annual shareholders' meeting, Chairman and CEO Samuel Allen said that the company plans to reach net sales of $50 billion, compared to its 2011 sales outlook of $26.97 billion. The company also targets a 12% growth in operating margins by 2014.

With demand outstripping supply for many crops, there has been a renewed focus on farming, which is expected to boost machinery sales. Deere is planning to make use of the opportunity to expand globally through major global investments.

The company noted that agricultural equipment is expected to remain its largest business sector, while it also plans to make major investments in construction operations. With a strong focus on global expansion, the company has announced a number of major projects over the last year. As a part of its expansion plan, the company opened a new manufacturing and parts complex in Russia that became operational last spring. It is producing advanced farm, construction and forestry machinery for the Russian market.

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