What to Look for
On the positive side, the top-line will likely benefit from the stable performance by the Construction & Forestry segment and favorable conditions in the South American market, especially Brazil. The measures being adopted by the management to reduce costs and improve the product portfolio, through the integration of new technology, might offset the pressure on profitability to some extent.
Market watchers predict a 7% decline in earnings to $2.14 per share for the fourth quarter on revenues of $8.55 billion, which is up 2.5% year-over-year. Earnings missed the Street view in each of the trailing four quarters. Deere executives are expected to drop hints on the long-term growth strategy at the upcoming conference call.
Past Performance
For the third quarter, the company posted stronger-than-expected revenues of $10 million. Though earnings increased annually, they fell short of expectations. The results were negatively impacted by the general softness in the farm sector and unfavorable foreign exchange rates.
Almost half of the analysts following Deere recommend hold, with a price target of $171. Earlier this month, Deere shares climbed to a record high, continuing the uptrend that started several months ago. The stock advanced 14% so far this year, despite some volatility, and outperformed the market.
Caterpiller Disappoints
Caterpillar (CAT), another leading provider of agricultural equipment, registered lower sales for its key business divisions in the third quarter. The top-line declined 6% to $13 billion and earnings dropped 7% to $2.66 per share. The company also projected flat sales for the fourth quarter.