Heavy equipment manufacturer Deere & Co (NYSE: DE) reported mixed fiscal 2022 third-quarter results. While earnings missed estimates, revenues surpassed expectations. The company also slashed its FY 2022 earnings outlook. Following mixed quarterly results and a weak outlook, the stock of Deere closed Friday’s trading session at $369, almost unchanged from its prior close.
The Moline, Illinois-based company reported third-quarter net sales and revenues of $14.102 billion, an increase of 22% from $11.527 billion in the comparable quarter last year. Despite supply chain issues, the company was able to record a surge in revenues because of higher production rates.
Net sales for Q3 2022 were $13 billion, compared with $10.413 billion in Q3 2021.
For the quarter ended July 31st, 2022, Deere reported a net income of $1.884 billion, or $6.16 per share, up 13% from $1.667 billion, or $5.32 a share, in the quarter ended August 1st, 2021.
Analysts polled by Thomson Reuters had anticipated the company would record earnings of $6.69 per share on revenues of $12.78 billion.
Regarding the quarterly results, John May, chairman and CEO, stated, “Our results reflected higher costs and production inefficiencies driven by the difficult supply-chain situation.”
Segment wise,
- Production & precision ag net sales surged 43% y-o-y to $6.096 billion. The sharp rise was led by higher shipment volumes and price realization, partly negated by the negative impact of the currency exchange rate.
- Small ag & turf net sales were $3.635 billion, an increase of 16% from last year.
- Construction & forestry net sales grew by 8% y-o-y to $3.269 billion. Higher price realization enabled the segment to record an increase in sales.
- Financial services revenues remained almost unaltered at $903 million.
- Other revenues fell by 6% to $199 million.
Looking forward, Deere expects the Production & Precision Ag segment to record sales growth in the range of 25% to 30%. Small Ag & Turf segment is forecast to post sales growth of between 10% and 15%. Construction and Forestry revenues are anticipated to rise by roughly 10%.
Furthermore, the company now expects FY 2022 net income to be between $7 billion and $7.20 billion. Earlier, Deere had forecast net income to be in the range of $7 billion to $7.40 billion. The company further stated that robust order books and positive client fundamentals are anticipated to fuel demand next year.
The quarterly earnings miss and downward revision of the FY 2022 earnings view are expected to keep the stock of Deere range bound with a slight bearish bias in the short term.
The historical price chart indicates that the stock of Deere is declining after facing resistance at 370. The next support is anticipated at around 340. Additionally, the stochastics indicator is in the overbought region. Therefore, we are anticipating the stock to decline in the days ahead.
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