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Deere Q4 Profit Climbs On Strong Equipment Sales; Gives Q1, FY08 View - Update
Wednesday November 21, 2007 09:39:00 EST
(RTTNews) -
Agricultural and commercial equipment manufacturer Deere & Co. (DE) on Wednesday reported a 52% rise in its fourth-quarter profit, on the strength of equipment sales mainly from agricultural and commercial & Consumer equipments. The company's quarterly earnings surged 57% and surpassed the Wall Street view.
Total net sales and revenues for the quarter grew 20% and beat the analysts' consensus. Further, the Moline, Illinois-based company provided first quarter and fiscal 2008 forecast for net income and equipment net sales growth.
Q4 Results
The company posted net income of $422.1 million in the fourth quarter that climbed 52% from $277.3 million in the same period last year. Income from continuing operations grew 53% to $422.1 million from $276.7 million in the last year quarter. On a per share basis, earnings increased 57% to $1.88 from $1.20 a year ago.
Deere noted that earnings per share figures do not reflect the recently approved two-for-one stock split.
On average, 17 analysts polled by First Call/Thomson Financial expected the company to report earnings of $1.55 per share for the quarter.
In the third quarter, the company posted net income of $537.2 million or $2.37 per share.
The company's total net sales and revenues for the fourth quarter increased 20% to $6.14 billion from $5.12 billion in the same period prior year, and beat four analysts' consensus revenue estimate of $5.80 billion. Sequentially, fourth-quarter net sales and revenues fell from $6.63 billion.
Total operating profit surged 62% to $657 million from $405 million in the previous year.
Among divisions, total net sales of the equipment operations for the fourth quarter climbed 21% to $5.42 billion from $4.49 billion a year earlier. Deere expected company equipment sales to increase by about 16%. Equipment sales in the U.S. and Canada were up 15%, while net sales outside the U.S. and Canada increased 32% year-over-year to $2.01 billion. Deere's equipment divisions reported operating profit of $511 million for the quarter, compared to $276 million last year.
The company's Agricultural equipment sales grew 35% year-over-year to $3.19 billion, driven by higher volumes, the favorable effects of currency translation, and improved price realization. Operating profit was $388 million for the quarter, up from $143 million last year.
Commercial & Consumer equipment net sales climbed 35% from last year to $1.03 billion. The company noted that LESCO operations accounted for 29 percentage points of the quarter's increase. Meanwhile, the division had an operating loss of $11 million, wider than last year's operating loss of $3 million.
Construction & Forestry sales declined 11% to $1.21 billion, and operating profit dropped to $134 million from $136 million a year ago, mainly due to lower sales volumes, largely offset by improved price realization.
Deere's credit revenues in the quarter increased 13% to $567 million from $502 million in the previous year.
Deere's subsidiary John Deere Capital Corp. or JDCC, reported fourth-quarter net income was $82.8 million, compared to net income of $73.8 million last year. Results benefited primarily from growth in the portfolio, partially offset by increased selling, administrative and general expenses.
Peer Performance
On October 19, construction and mining equipment company Caterpillar Inc. (CAT) reported a 20.5% increase in third-quarter earnings, reflecting improved sales volume and price realization along with continued strength in overseas markets. The company's third-quarter profit rose to $927 million or $1.40 per share from $769 million or $1.14 per share a year ago. Caterpillar's sales and revenues reached $11.44 billion, up 9% from $10.52 billion in the prior-year quarter.
According to Caterpillar, higher sales volume, improved price realization and favorable currency effects from higher financial products revenues contributed to the total sales and revenues growth.
Agricultural and construction equipment provider CNH Global NV (CNH) in late October said its third-quarter profit jumped 82% from last year, on strong sales growth. Net income for the third quarter was $122 million or $0.51 per share, up from $67 million or $0.28 per share in the prior year quarter. Excluding restructuring charges, net income was $148 million, up 108% from $71 million in the previous year quarter. Adjusted Earnings per share improved to $0.62 from $0.30 in the preceding year quarter.
CNH Global's total revenues were $3.8 billion, up 31% from $2.9 billion in the year-ago quarter, while total net sales increased 33% to $3.6 billion from $2.7 billion in the same quarter of last year.
FY07 Results
For the fiscal 2007, Deere's net income rose 8% to $1.82 billion or $8.01 per share from $1.69 billion or $7.18 per share last year. Full-year income from continuing operations climbed 25% to $1.82 billion or $8.01 per share from prior year's $1.45 billion or $6.16 per share.
For the full year, the company was looking for net income of about $1.70 billion.
Worldwide net sales and revenues increased 9% to $24.08 billion from $22.15 billion in 2006. Net sales of the equipment operations grew 8% to $21.49 billion for the year from $19.88 billion last year. For the full year, the company expected equipment sales growth of about 7%.
Commenting on the results, Robert W. Lane, chairman and chief executive officer, stated, "Deere's continuing strong performance reflects improving execution of our plans to create a fundamentally more profitable, resilient business. As a result, the company has delivered four successive years of record results, and done so in the face of mixed market conditions."
Outlook
Looking ahead to first quarter, Deere said it expects net income to be about $325 million. Equipment sales are projected to increase approximately 25% for the quarter.
For the fiscal 2008, the company anticipates net income to be about $2.1 billion, while equipment sales are estimated to rise about 12%.
The company noted that LESCO operations are expected to account for about 3 percentage points of the sales increase in the first quarter and 2 points in the year.
Among divisions, agricultural equipment sales are expected to increase by about 17% for full-year 2008, driven by continuing strength in the farm sector. John Deere commercial and consumer equipment sales are projected to be up about 10% for the year, including about 8 percentage points from a full year of LESCO sales.
In the Construction & Forestry equipment division, the company expects U.S. markets to remain under pressure in 2008 due in large part to a continuing slump in housing starts. Non-residential construction is expected to remain flat at last year's relatively strong levels.
Lane said, "Deere is well-positioned to continue benefiting from powerful global economic trends such as growing affluence and increasing demand for food, feed and biofuels. Our plans for growing a great business are well on track, and yielding impressive results."
