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What to Expect from Deere's Fiscal 1Q18 Earnings

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Part 3
What to Expect from Deere's Fiscal 1Q18 Earnings PART 3 OF 4

Can Deere’s 1Q18 Earnings per Share Beat Analyst Estimates?

Deere’s 1Q18 earnings per share expectations

Deere is expected to post EPS (earnings per share) of $1.20 for fiscal 1Q18, an increase of 96.0% on a YoY (year-over-year) basis. In fiscal 1Q17, Deere reported EPS of $0.61. Deere managed to beat analyst estimates throughout fiscal 2017. It remains to be seen if Deere can continue this trend in fiscal 2018 as well.

Can Deere&#8217;s 1Q18 Earnings per Share Beat Analyst Estimates?

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Deere’s projected EPS is expected to be driven by higher revenue including revenue from Wirtgen Group, better control over the cost of goods sold (or COGS), and better SG&A (selling, general, and administrative) expenses as a percentage of sales. Analysts expect Deere’s cost of goods sold in fiscal 1Q18 to be at $5.0 billion, which represents 78.1% of the expected revenue. In fiscal 1Q17, Deere’s cost of goods sold was 80.8% of the sales from equipment operations, which implies a reduction of 270 basis points YoY.

Similarly, Deere’s SG&A expenses are expected to fall as a percentage of sales. Analysts expect Deere’s SG&A expenses to be at $737.3 million in 1Q18, which is 11.5% of the expected sales of equipment operations. In fiscal 1Q17, the SG&A expenses were reported at 14.0%, which implies a fall of 250 basis points on a YoY basis.

Share repurchases

Deere didn’t buy back any shares in 4Q17. At the end of 4Q17, DE had 325.8 million outstanding shares. It remains to be seen if DE made any share repurchases during fiscal 1Q18. DE has $3.3 billion in its share repurchase program.

Investors can hold Deere indirectly by investing in the First Trust Indxx Global Agriculture ETF (FTAG), which has 4.8% of its portfolio in Deere. FTAG’s other holdings include DowDuPont (DWDP), Monsanto (MON), and FMC (FMC) with weights of 10.1%, 10.0%, and 2.2%, respectively, as of February 12, 2018.

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