10-QPeriod: Q3 FY2017

DEERE & CO Quarterly Report for Q3 Ended Jul 30, 2017

Filed August 31, 2017For Securities:DE

Summary

Deere & Company reported strong financial results for the third quarter and the first nine months of fiscal year 2017. Net income attributable to Deere & Company significantly increased year-over-year for both periods, driven by higher net sales and revenues across its equipment and financial services segments. The agriculture and turf segment, as well as the construction and forestry segment, experienced substantial sales growth, particularly benefiting from increased shipment volumes and price realization. Key drivers of this performance include improved market conditions globally, with a notable uptick in South American agricultural machinery sales and robust growth in construction equipment. The company's strategic focus on an advanced product portfolio and a more efficient cost structure contributed to these positive results. Looking ahead, Deere & Company projects continued sales growth for the full fiscal year 2017, underscoring a positive outlook for the business.

Financial Highlights

45 data points
Beta

Revenue

$7.81B

20.3% Gross Margin

Net Income

$642.00M

8.2% Net Margin

EPS (Diluted)

$1.97

Total Assets

$62.35B

Cash & Equivalents

$6.54B

Free Cash Flow

$772.30M

Financial Statements
Beta
Revenue$7.81B
Cost of Revenue$5.25B
Gross Profit$1.58B
R&D Expenses$336.80M
SG&A Expenses$799.10M
Operating Expenses$6.92B
Operating Income$1.00B
Interest Expense$216.30M
Net Income$642.00M
EPS (Basic)$2.00
EPS (Diluted)$1.97
Shares Outstanding (Basic)320.80M
Shares Outstanding (Diluted)325.10M

Key Highlights

  • 1Net income attributable to Deere & Company surged significantly in Q3 2017 ($641.8M, up from $488.8M in Q3 2016) and for the first nine months ($1,648.8M, up from $1,238.6M in 2016).
  • 2Worldwide net sales and revenues increased by 16% in Q3 2017 to $7.8 billion, and by 8% for the nine-month period to $21.7 billion, driven by strong equipment sales.
  • 3The Agriculture and Turf segment saw sales rise 13% in Q3 and 5% year-to-date, supported by higher shipment volumes and price realization.
  • 4The Construction and Forestry segment experienced a significant 29% sales increase in Q3 and 10% year-to-date, primarily due to higher shipment volumes.
  • 5Financial Services reported a slight increase in net income for Q3 2017 ($131.2M vs. $125.9M in Q3 2016), with full-year net income expected around $475 million.
  • 6The company is actively pursuing strategic growth, evidenced by the pending acquisition of Wirtgen Group for approximately $5.4 billion, expected to close in early fiscal year 2018.
  • 7Deere & Company forecasts full-year fiscal 2017 net sales and revenues to increase by approximately 11% with a projected net income attributable to Deere & Company of about $2,075 million.

Frequently Asked Questions

The improved financial performance was primarily driven by higher net sales and revenues across both the equipment and financial services segments. Specifically, increased shipment volumes, favorable price realization, and a strong demand for agricultural and construction equipment globally, particularly in South America, were key contributors. The company also benefited from its advanced product portfolio and a more efficient cost structure.

The Agriculture and Turf segment saw a 13% increase in sales for the third quarter and a 5% increase year-to-date, driven by higher volumes and pricing. The Construction and Forestry segment experienced a substantial 29% sales increase in the third quarter and a 10% increase year-to-date, mainly due to higher shipment volumes. The Financial Services segment showed a modest increase in net income for the third quarter, with full-year net income expected to be around $475 million.

Deere & Company projects an 11% increase in net sales and revenues for the full fiscal year 2017, with an anticipated net income of approximately $2,075 million. A significant future event is the pending acquisition of Wirtgen Group, a leading manufacturer of road construction equipment, for approximately $5.4 billion, expected to close in the first quarter of fiscal year 2018. This acquisition is expected to enhance Deere's position in the global construction equipment market.

For fiscal year 2017, industry sales for agricultural equipment in the U.S. and Canada are forecast to decrease by about 5%, while South American sales are projected to increase by about 20%. Global construction equipment markets are expected to show moderate economic growth, with Deere forecasting a 15% increase in its construction and forestry equipment sales for the year.