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Earnings preview: Deere & Company poised to deliver mixed results for Q3

Deere & Company (NYSE: DE) is one among the Wall Street firms affected by the trade war. At a time when sales are impacted by weakening demand, the farm equipment maker got a fresh jolt after China recently imposed curbs on import of agricultural tools from the US.

The Moline, Illinois-based firm is expected to unveil its third-quarter results Friday before the opening bell. The market forecasts a 10% growth in earnings to $2.86 per share, while sales are seen rising 1.3% to $9.4 billion.

Deere (DE) stock tanks after Q2 earnings miss estimates

This year, sales of Deere’s poplar products and heavy equipment were hit by softening demand as farmers remain concerned about low commodity prices in the local market and bleak export prospects. The market conditions point to muted top-line growth for the July quarter, while profitability is likely to be impacted by elevated tariffs, unfavorable exchange rates, and high transportation costs.

Also read: Caterpillar reports lower earnings for Q2

These negative factors will be offset to some extent by the management’s cost-cutting efforts and improvements in operational efficiency. On the sales front, stable demand from industries, especially for turf and agricultural equipment, will contribute to growth.

Sales of Deere’s construction and forestry products have remained stable in the recent past, which is expected to continue this time. Additionally, the construction segment is estimated to have benefited from Wirtgen, which was added to the Deere fold more than a year ago. The general outlook for the company’s financial division is also positive.

Related: Deere & Co. Q2 2019 Earnings Conference Call Transcript

For the second quarter, the company reported stronger-than-expected sales of $11 billion, up 6% year-over-year. As a result, earnings grew 12% to $3.52 per share but fell short of expectations.

A few weeks ago, Deere’s shares crossed the $170-mark and reached an all-time high. Having recovered from the selloff triggered by the unimpressive second-quarter results in May, the stock is currently trading close to the levels seen at the beginning of the year. It gained about 5% in the past twelve months.

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