All Eyes On Guidance When Deere Reports Q4 Results

While Deutsche Bank’s Nicole DeBlase expects Deere & Company (NYSE: DE) to report its Q4 EPS in line with the consensus, the analyst believes that all eyes would be on the FY 2017 guidance.

DeBlase maintains a Hold rating on the company, while lowering the price target from $95 to $92.

Q4 Expectations

“We have tweaked our model slightly, predominately within the C&F segment given that peers broadly reported weaker-than-expected NA construction volumes (and pricing) during the recently ended 3Q reporting season,” the analyst mentioned.

DeBlase expects Deere to report its EPS for Q4:16 at $0.40, in line with the consensus, offsetting weaker top line by pulling forward the cost actions it had announced earlier.

Margins are expected to have declined 290 bps year-on-year, as compared to the 170 bps expansion in Q3.

All Eyes On Guidance

The net income for the full year is estimated at $1.37 billion, marginally ahead of the guidance of $1.35 billion.

“To some extent, 4Q earnings results will not be the predominant focus of Wednesday’s earnings release, since Deere will also initiate FY17e guidance,” DeBlase pointed out.

The analyst estimated a 3 percent year-on-year organic revenue decline for the Equipment Ops segment, with expectations of Deere having achieved $250 million of its announced $500 million cost savings program for 2017–18.

“While it is possible that management may elect to guide the top-line more conservatively, we believe this could be compensated by a pull-forward of cost savings into FY17e, and so it is possible that management guides to current cons of $1.2 billion net income,” DeBlase stated.