Why Deere & Co. (DE) Stock Is Lower This Morning

NEW YORK (TheStreet) -- Shares of Deere & Co.  (DE) are down -1.67% to $92.05 in pre-market trade after reporting net income was $980.7 million, or $2.65 per share, for the second quarter ended April 30, compared with $1.084 billion, or $2.76 per share, for the same period last year. 

Analysts polled by Thomson Reuters projected earnings of $2.47 a share and revenue of $9.65 billion for the quarter

For the first six months of 2014, net income was $1.662 billion, or $4.46 per share, compared with $1.734 billion, or $4.41 per share, last year.

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Worldwide net sales and revenues decreased 9%, to $9.948 billion, for the second quarter and were down 4%, to $17.602 billion, for six months.

Net sales of the equipment operations were $9.246 billion for the quarter and $16.195 billion for six months, compared with $10.265 billion and $17.058 billion for the same periods last year.

The company said equipment sales are projected to fall about 4% for fiscal 2014 and for the third quarter compared with the year-ago periods. Included is an unfavorable currency-translation effect of about 1% for the year. For the fiscal year, net income is anticipated to be about $3.3 billion.

TheStreet Ratings team rates DEERE & CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate DEERE & CO (DE) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, increase in net income, growth in earnings per share and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DE's revenue growth has slightly outpaced the industry average of 2.0%. Since the same quarter one year prior, revenues slightly increased by 3.1%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to -$746.20 million or 40.27% when compared to the same quarter last year. In addition, DEERE & CO has also modestly surpassed the industry average cash flow growth rate of 36.44%.
  • The net income growth from the same quarter one year ago has exceeded that of the Machinery industry average, but is less than that of the S&P 500. The net income increased by 4.8% when compared to the same quarter one year prior, going from $649.70 million to $681.10 million.
  • DEERE & CO has improved earnings per share by 9.7% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, DEERE & CO increased its bottom line by earning $9.08 versus $7.64 in the prior year. For the next year, the market is expecting a contraction of 6.7% in earnings ($8.48 versus $9.08).
  • In its most recent trading session, DE has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • You can view the full analysis from the report here: DE Ratings Report

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