Deere (DE) posted stellar fourth-quarter results that beat analysts’ EPS expectations while also providing a bullish outlook for FY22.

The manufacturer that reported better-than-expected earnings results not only quarreled widespread supply chain issues, semiconductor shortages, and rising costs but also faced difficulties when 14% of its workforce went on strike for five weeks in mid-October.

WHAT HAPPENED

The labor strike that began on 14 October 2021 had approximately 10,000 union-represented workers walking off the job for the first time in over three decades. The demand for higher wages and better benefits came when Deere’s equipment sales boomed, and other manufacturers have boosted pay to recruit workers.

After confirming a new contract, union members returned to their jobs last week. According to Deere, the deal will cost as much as $300 000 million a year during the 6-year contract, with some expenses for pensions and other benefits deferred to later years.

WHAT TO EXPECT

Some immediate costs for the new contracts and reduced production during the 35-day strike will reflect in the first-quarter results of Deere’s 2022 fiscal year. However, the company expects the effects to lessen as the year progresses.

Costs for materials and transportation for 2022 will increase by $2 billion, with two-thirds of the expenses occurring in the first half of the year.

However, CEO John May expects that high crop prices, along with increased investments in infrastructure, should continue to be driven by strong sales for farm and construction equipment.  

The company predicts sales of large farm equipment to increase by as much as 25% in 2022. Moreover, Deere plans to raise prices on large farm equipment by 9% and construction and forestry machinery by 8% next year.

THE RESULTS

On Wednesday, 24 November, shares of the largest agricultural equipment manufacturer soared 5.2%, closing at $367.86.  

Net sales and revenues rose 16% year-over-year to $11.327 billion, and Net profit for 2022 is estimated to be between $6.5 billion and $7 billion.

Overall revenue for the most recent quarter was $11.33 billion, up 16% from $9.73 billion in the same quarter a year ago.

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