Deere & Company (DE) Q4 2018 earnings summary

Executive summary

• Improved agricultural and construction markets and customer demand for advanced products drove FY18 net sales and revenues to $37.36B, up 26% YoY and the second-highest level on record.

• Net income attributable to Deere & Company was $2.368B, up 10%; U.S. tax reform charges reduced earnings by $704M.

• Operating profit rose 25% to $4.476B; Shareholder Value Added (SVA), a non-GAAP measure, reached $1.86B.

Financial highlights

• Equipment net sales increased 29% to $33.35B; equipment operating profit rose 29% to $3.684B.

• Diluted EPS was $7.24 vs. $6.68 in FY17; dividends declared were $2.58 per share vs. $2.40.

• Cost of sales was 76.7% of net sales in both FY18 and FY17; pricing and lower warranty claims offset higher production costs.

• Consolidated operating cash flow was $1.820B; equipment operations generated $3.279B of cash flow.

Outlook and guidance

• FY19 net sales and revenues are projected to increase ~7%, with net income attributable to Deere & Company forecast at ~$3.6B; currency translation is expected to reduce equipment sales ~2%.

• FY19 Agriculture & Turf sales are forecast to rise ~3%, including a 2% unfavorable currency effect; Construction & Forestry sales are expected to increase ~15%, including ~5% from two additional Wirtgen months.

• FY19 Financial Services net income is forecast at ~$630M; excluding the FY18 tax-reform benefit, higher portfolio is expected to be partly offset by higher expenses, credit provisions and less favorable spreads.