How Will Deere Perform In Q2?

Deere (NYSE: DE) is expected to publish its Q2 2018 results on May 18, reporting on what is likely to be another strong quarter. Consensus market estimates call for the company to report revenue of $9.8 billion and adjusted EPS of $3.29. Strong performance in key segments such as Agriculture and Turf, and Construction and Forestry should drive Q2 earnings. We expect continued global tailwinds – increased global food consumption and higher population density that will drive a greater need for infrastructure development – to drive these results. Further, the implementation of U.S. tax reform, which brings down the effective tax rate by nearly 500 basis points to a range of 25-27%, should help it further boost its bottom line. Below, we take a look at what to expect when the company reports earnings.

We have a $178 price estimate for Deere, which is higher than the current market price. Our interactive dashboard details our forecasts for the company’s key drivers. You can modify our assumptions and forecasts, and gauge their impact on the company’s earnings and valuation.

For 2018, Deere expects further improvement in the Agriculture segment, driven by increased replacement demand and need for new equipment. Further, its most recent acquisition of Blue River Technology should help farmers reduce costs by decreasing the use of herbicides, which should lead to increased demand for its crop spraying equipment and provide decent long-term benefits. We expect the positive outlook for Deere to continue into 2018, driven by improving conditions of the agriculture market, and increased global food consumption, which will likely spur demand for its agriculture products. The Construction segment contributes nearly 20% of the company’s overall revenues and has been the fastest growing segment of late, primarily due to the higher shipment volumes and its acquisition of Wirtgen Group. In addition, strengthening of the U.S. economy should boost the U.S. Housing market and construction spending. The industry is expected to grow further in 2018 which, coupled with the Wirtgen acquisition, should boost Deere’s construction business.

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