Consensus estimates from equity analysts are for Deere to show earnings of $1.48 per share in the most recent quarter, a decline of 27 percent from $2.03 per share reported a year ago, according to Thomson Reuters. Worldwide revenue is forecast to decline 9 percent to $6.7 billion.
The Moline, Illinois–based company's largest segment, ag and turf, is forecast by analysts to show an April quarter sales decline of 9 percent, according to FactSet. The construction and forestry segment's revenue is projected to fall nearly 12 percent. The three previous quarters have seen both segments posting even bigger declines, but analysts say the comparisons are getting easier.
In North America, a glut of used farm equipment that's available remains a challenge for Deere as it looks to sell new machinery. Macquarie Capital recently looked at the pricing of older farm machinery sold at auction and found "prices for Deere tractors remain negative, falling approximately 11 percent year-over-year in April." Also, the investment firm predicts the used market will "see [price] declines continuing through 2016."
During its earnings conference call in February, Deere provided a full-year 2016 forecast calling for a 10 percent sales decline. It forecast full-year 2016 earnings of $1.3 billion back in February, a downward revision from its earlier forecast calling for earnings of $1.4 billion. Deere reported net income of $1.94 billion in fiscal 2015 ending Oct. 31.
"Overall, we think the buy-side is anticipating a reduction to fiscal year 2016 guidance, which is not our baseline view," Citi analyst Timothy Thein said in a Deere preview note Monday. Also, the analyst doesn't expect Deere's management to make changes to its U.S./Canada ag and turf or construction and forestry segment outlooks. However, he sees "risk" on the South America front with the political changes in Brazil, including a new ag minister potentially making farm policy changes.
Some of the headwinds Deere may discuss during its earnings call were already highlighted by its farm machinery competitor AGCO, which last month reported first-quarter earnings that exceeded analysts' estimates. In discussing Brazil, AGCO said demand for farm machinery in that market is challenging, given "political instability, economic weakness and uncertainty on the funding levels of the government-subsidized financing programs in Brazil."